How to finance a start-up company: A Guide for Directors

How to secure funding for a start-up venture

With so many alternative financing options now available in the UK, it’s not difficult to find funding solutions geared specifically towards the needs of start-up companies - no longer are traditional business loans the only option.

As a start-up, you can leverage the value of your balance sheet assets and overcome the need to present an extended trading history to support your application, for example. Initially, though, it’s worthwhile reliably narrowing down your options, which is where our team can help.

UK Business Finance are commercial finance brokers. We’ll scour the whole of the market to find you the best deals on a free, no obligation basis. So which types of finance might be appropriate for your start-up company?

Hire Purchase (HP)

Hire purchase is a form of asset finance that allows you to spread the cost of expensive assets, such as vehicles, machinery, and equipment, usually for up to six years. Hire purchase is also a good option if you want to own the asset at the end of the agreement.

You make an initial deposit followed by a schedule of fixed monthly repayments and then make a ‘completion’ payment that transfers ownership to your company. You may also be eligible to claim capital allowances on the asset if you use hire purchase to finance it.

Secured and unsecured start-up loans

The fact that repayments are fixed is important when financing a start-up company as it aids budgeting and stabilises cash flow. Secured and unsecured start-up loans offer the benefit of fixed repayments and are flexible enough to be used for a range of purposes.

Whether you’re looking to purchase a balance sheet asset affordably or want to grow the business by expanding your workforce, a start-up business loan can be a good choice. It allows you to sustainably build the business either by providing an asset as collateral to access the funding or a personal guarantee.

Invoice finance

If you’re a start-up company but can offer some form of trading history that supports your application, invoice finance will provide regular cash injections throughout the month. This type of company financing works by releasing the value within your sales ledger – funds that wouldn’t otherwise be accessible for up to 90 days in some cases.

Factoring your invoices also transfers control of your sales ledger to the financier, releasing valuable time for you to concentrate on growing your sales. Furthermore, invoice finance providers take into consideration the creditworthiness of your customers when sanctioning a loan, rather than basing decisions entirely on your company’s credit rating.

Considerations when financing a start-up

When thinking about funding your start-up, you’ll need to consider:

• Whether you have any business assets that could be put forward as collateral
• If your sales ledger is strong, with few incidences of bad debts
• Whether you want your business to own an asset that you finance
• Using the services of an independent commercial finance broker

Please get in touch with our specialists at UK Business Finance to find out more. We’ll establish the most suitable type of finance for your company and find the best deals, free of charge to you.