Startup Funding Options for UK Businesses

One of the biggest barriers for businesses is finance. It’s what puts thousands of entrepreneurs off exploring their ideas and launching a business. The good news is that there are dozens of options available to UK start-up businesses to help them launch and expand their companies. These funding opportunities can feel overwhelming if you’re new to the business environment.

It’s worth remembering that funding opportunities are a one-size-fits-all scheme. There are different funding opportunities for startup funding tailored to specific industries and company types, particularly for tech companies. Private investors will often require a portion of your company’s equity in exchange for their investment. Research and development funding is more easily accessible for some start-ups, helping to get thousands of businesses off the ground every year.

We’re taking a look at the different funding options available for start-ups in the United Kingdom. It may take several tries for you to find the right start-up funding option for your business, but there is guaranteed to be a potential opportunity out there for you.

Government funding opportunities

Government incentives for startup funding are amongst the most valuable funding opportunities available for businesses. Every business in its early stage wants to be taking full advantage of tax credits and government funding to help accelerate growth and development. The UK government sets aside a dedicated fund every year for small businesses and start-ups, meaning these schemes are readily available for you to apply for.

Significant investment is offered for start-ups as they provided avenues for innovation, progress, and more efficient systems. Some businesses in the research and development industry can be eligible for getting up to 33p back for every £1 that they spend on R&D.

Two of the most popular funding schemes for UK start-ups include the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS).

Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme is one of the 4 venture capital schemes offered by the UK government to support startup funding. The scheme operates by offering tax relief for investors who purchase shares in UK companies. Through the EIS scheme, a start-up business can raise up to £5 million a year or a maximum of £12 million across the company’s lifetime. These figures also include any funding received through similar venture capital schemes offered by the government.

As a requirement of the EIS scheme, any money raised through the tax credit scheme must be used for a qualifying trade, preparing for said trade, or research and development to lead to trading. The money raised through the incentive of the scheme must be spent within 2 years and used for the growth or development of the business.

To qualify for the EIS scheme, your company must have a permanent establishment within the UK and not trade or trade to plan on a stock exchange.

You can find out more about the Enterprise Investment Scheme through the UK government website. You might be interested in: Business Asset Disposal Relief – Formerly Entrepreneurs Relief.

Seed Enterprise Investment Scheme (SEIS)

Another one of the 4 venture capital schemes offered by the government is the Seed Enterprise Investment Scheme (SEIS). The scheme is designed to help start-ups in the early stages of their development. It works similarly to the EIS by providing tax relief for individual investors when they purchase new shares in the company.

Compared to EIS, this scheme allows you to receive up to £150,000 through investments. This total includes any other state aid that your start-up receives in the 3 years up to the investment. Any funding received through the SEIS will count towards funding limits for other funding schemes, including EIS.

For your company to qualify for SEIS, you’ll need to have a new qualifying trade and be established in the UK. Your company cannot be trading or planning to trade on a recognised stock exchange when the shares are being issued.

Additional requirements include the fact that your company cannot have gross assets valued over £200,000, and it cannot be a member of a partnership. Your start-up must also have less than 25 full-time equivalent employees at the time of the shares being issued.

You can find out more about the Seed Enterprise Investment Scheme through the UK government website.

Crowdfunding

Another option for startup funding that your start-up has is using crowdfunding to raise capital. It takes a village to make a start-up a success. This funding option is available for businesses of any size and at any stage. It’s worth remembering that you’ll need to offer potential funders an incentive to encourage them to contribute to your crowdfunding efforts.

You can offer potential crowd funders access to your products early or exclusive access to particular services or benefits. Dozens of websites offer crowdfunding facilities for you to attract potential investors from across the globe.

Get a startup loan

In some startup funding situations, it may be more beneficial for your start-up to take out a start-up loan than to access government funding. These loans typically have low interest rates and can provide you with access to more readily available capital than the EIS or SEIS scheme. Some loan providers will offer opportunities for mentorship and other support schemes to facilitate business growth.

Private Equity and Venture Capital

If your business concept has significant potential you may be able to get a VC fund to invest in your business, PE Houses on the other hand tend to focus on more established businesses with significant growth potential, FD Capital does offer FD’s and CFO’s with private equity fund raising experience.

Angel Investors

If you decide that private investors are better suited for your business, angel investors are worth considering. These are individuals with a high net worth who want to support potentially lucrative businesses in their initial stages of development. There are platforms online that allow you to pitch to potential angel investors or you can network within your local community or industry. The best angel investors are ones who have a genuine interest in your industry or niche, providing you with both financing and mentorship.

As a start-up business in the UK, access to capital can be one of the biggest hurdles to your growth and development. At FD Capital, we’re passionate about helping start-up businesses succeed by helping them access funding opportunities. Our team of finance directors and CFOs can help your start-up access funding schemes, including the government’s EIS and SEIS schemes. You can find out more by getting in touch with us today by using our contact form.

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Adrian Lawrence

Adrian Lawrence FCA with over 25 years of experience as a finance leader and a Chartered Accountant,  BSc graduate from Queen Mary College, University of London.

I help my clients achieve their growth and success goals by delivering value and results in areas such as Financial Modelling, Finance Raising, M&A, Due Diligence, cash flow management, and reporting. I am passionate about supporting SMEs and entrepreneurs with reliable and professional Chief Financial Officer or Finance Director services.