Funding and government grants for start-ups 2022

If you’re considering starting up a new venture in 2022, then you are likely to need some money to startup your new business. Many new businesses fail due to financial issues, so working out how much money you need not only to startup but to continue to run the business will be a key factor to it’s ongoing success.

It’s important to know the startup funding options available to you and consider all of these before deciding on how to fund your startup.

Where can I get funding for a startup business?

There are a wide variety of sources of funding for startups and in this blog we cover the main options available to new businesses.

What is the best financing option for a startup?

There is no definitive answer to this question, it’ll depend on the type of business you are setting up, where you’re located, the industry you’re in and potentially even the geographical location of your business. Below are the main funding options available to startups that you should research and consider.

Startup funding options

Self-funding a startup

Often starting your business using your own personal funds is a simple option for those people that have the personal funds to do this. Investors often won’t lend money to new startups unless you have a strong business case to convince them.

If you’re planning to run a business that has low startup and monthly costs (for example a consultancy business from home) then self-funding may be an option for you.

If you’re business requires significant up-front investment, maybe in premises, products, or equipment, then this option may not be best for you.

Friends and family

Friends and family may also be a good source of funding for startup businesses. It can be an easier option as they may take less convincing than an external investor.

You can agree the terms and conditions of the funding between you. However, It is worth drawing up some sort of written legal agreement on the payments and terms of the loan (if it is a loan) and ensure it’s clear if they have any responsibility or future say in the business to avoid unnecessary disagreements or misunderstandings later down the line.

As with self-funding, it’s wise to still go through the process of preparing a business plan, that includes financial information about the business and would be worth sharing this with whoever is providing the money to you.

You need to consider how this could affect future relationships and agree what information they will want ongoing about the money and the business generally, so communication is key.

Government grants for startups

The two main questions we’re often asked is ‘can startups get grants?’ and ‘How do I get government funding for my startup?’.

The answers to these questions are:

Yes, startups can often get government or local authority grants to help their business in its early stages.

To access these grants, there will be different criteria and application processes for each. A great place to start is on the governments websites to find out what grants are currently available in your region. You can find links below to the key places to find grants for startups.

England: Business Finance Support Finder.

Scotland: Scottish Funding Opportunities

Wales: Business Grants

Ireland: Enterprise Ireland

Bank loans for start-ups

Your bank may be the first place you think of to go to ask for a loan for your startup. However, often banks are cautious of lending money for startups because of high failure rates and uncertainty of their success.

Often a bank may ask you to commit some of your own money into your startup as well and are likely to charge higher interest rates. You could also be asked to put up collateral or security for the loan, for example equity in your home.

Crowd funding for start-ups

Crowdfunding is a way of raising capital to finance your startup by raising and collecting small amounts of money from a large number of people. Whilst this may give you fast access to cash, you’ll generally need a strong business idea, business plan and be able to promote your business to those who may consider investing. You’ll need a clear business and marketing strategy.

To obtain crowdfunding for your business, you’ll need to post your business details on crowdfunding website. There are loads to chose from with some of the more well known sites being:

• Crowdfunder.
• Seedrs.
• Crowdcube.
• Funding Tree.
• Kickstarter.

Not only is crowdfunding good for startups but also to get future funding for projects or products in the future.

Accelerators or incubators for start-ups

These tend to be focused more on tech led businesses. Business incubators run startup programmes and many offer access to premises, admin resource, technology, and logistics help. Incubators tend to be more focused on startups by offering longer term flexible timeframes and gives new business owners time to plan out their business ideas and eventually pitch the business idea.

Accelarators tend to support existing companies and help to speed up or achieve growth in a short space of time by offering mentorship, funding, and networking help.

Venture capital (VC)

This type of funding is provided by a Venture Capital firm, they invest in exchange for equity or an ownership stake of the business, so you will be relinquishing some control.

Venture capital funding is not easy to access or obtain. Venture capital firms provide not only capital but strategic assistance, customer introductions & networks as well as strategic partnership, employees, and business input and advice.

VC’s tend to focus on specific industries, company stages or geographies. Often, you’ll only get a chance of a one to one with a VC through introduction as they tend to be inundated with opportunities. The process is extremely rigorous and time consuming.

Angel investment for start-ups

An angel investor (or business angel) is an individual who provides funding and capital for a business in exchange for a return on their investment. Many angel investors are current, or ex business owners or executives and they may offer access to their experience and networks as part of the investment.

The exact rate of return that they expect depends on the individual investing, the industry and potential size of the business. In typical cases, an angel investor is likely to expect around 30-40% annual return on investment over three to ten years.It isn’t unusual for an angel investor to expect a rate of return that equals 10 times their original investment inside the first 5–7 years.

Startup grants and funding summary

How your fund your startup or accessing startup grants is a key consideration when you’re looking to start a new business venture. There are a wide range of startup grants and startup funding options potentially available to you.

If you need further help or advice on funding your startup or help with an application process or business plan, then contact our experts today by calling 3330 886 686, or you can also e-mail us at enquiry@dnsaccountants.co.uk.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.