5 Realistic Ways to Fund a Startup

Starting your first business venture alone can be challenging, especially financially. In addition, a large proportion of startups fail before they even get going.

Today, it proves even more challenging for the many startups wanting to secure funding in an ever-evolving tech world. But, fortunately, there are some realistic ways people can secure funding for a new small business today. This guide explores some of the most popular and viable options for different types of new businesses to fund themselves.

What Is Startup Funding? 

Startup funding refers to the initial stage of a business supporting itself financially. Whether a startup requires funding for marketing purposes, to hire a team of experts or to pay towards operation costs – startup funding can help cover this all. There are, moreover, many types of startup funding available for new businesses in the UK today. However, the many options can often be overwhelming to navigate for startup founders! Thankfully, TechRound has compiled a list of the most realistic ways startups can secure funding money. 

The Most Realistic Ways to Fund a Startup 

Launching a business is the first hurdle startups need to conquer. While applying for bank loans or opting for self-funding are both viable options, these aren’t necessarily accessible or viable options for startups in the UK today. For instance, a startup founder may keep their own job and aim to budget for their new business, but this can take several years. Likewise, applying for a bank loan can prove difficult as startups are viewed as a risk. 

So, without further ado, here are some other realistic ways startups can consider funding their new businesses… 

1. Small Business Loans 

Although high street banks and lenders do offer small business loans, these are not eligible for all types of startups and can take a while to secure. Alternatively, startups could consider opting for a different type of small business loan. For example, a startup trying to launch itself could apply for a second mortgage through a broker. Though not all brokers will offer the same competitive rates, doing so may ensure funding is secured more quickly. 

However, it is important for potential borrowers to keep in mind that these types of loans will require applicants to pledge their properties as security. So, if the startup does not launch or fails and the loan cannot be repaid then their home may be repossessed. 

If you are a startup and are considering a small business loan, it has become increasingly popular and viable to consider second mortgages as a funding option. Although a second mortgage requires the borrower to secure the loan against a property, they can be immensely useful when it comes to acquiring the capital  ended to start up a new business venture.

2. Family and Friends 

Funding a startup alone is not a feasible option for all new businesses. But, seeking financial assistance from a trusted family member or friend is! The major benefit of seeking financial help from a close relative or friend means the funding process will be quicker and potentially smoother. Nevertheless, it is important to still set up a formal arrangement between both parties in the event of something not going according to plan. Likewise, having an ‘exit plan’ (how you will give the money back) is always advised.

3. Equity Investment 

Equity investment simply refers to when a startup seeks investment from a venture capitalist (VC) or angel investor. This is typically achieved through pitching a startup to a group of investors. If they like the idea, then they can help inject funding into a startup in return for a share in the company. This option is an excellent route for businesses also wanting to network and establish ground in a competitive industry! 

On the other hand, equity investment may come with potential downsides. For instance, an investor will have autonomy over the business – meaning they have a say in what occurs. Though this is useful for startups seeking industry-leading advice or funding, it can be difficult to navigate if your startup idea is your “baby”. 

4. Business Grants 

Business grants, albeit rarer than they were a decade ago, are still a viable option for startups seeking large amounts of funding in the UK. Applying for a grant, nevertheless, is still a competitive and lengthy process when compared to the above funding options. This is because a lot of grants will require startups to have a bullet-proof business plan and one which meets certain criteria. For example, a startup may have to provide evidence that its business model is robust and that their product or service is filling a gap in the industry. But, that’s not to say your startup can’t secure a business grant with a bit of luck and thorough preparation. 

5. Crowdfunding 

Crowdfunding platforms in recent years have grown in popularity. Essentially, they enable startups to promote their business online and hopefully, in turn, will attract investment from people and/or firms. One of the additional benefits of crowdfunding is that it also enables startups to gain visibility, which can lead to further funding. Yet, not all crowdfunding appeals lead to the same amount of success so should be kept in mind.