How to work out how much you need and funding sources.

It wasn’t that long ago that borrowing from your bank, friends, or relatives were the only available options if you need to raise money to start your business. How times have changed!

While some banks are still an option for a robust proposition with match funding or the security of the equity in your home, many start-ups have found that traditional bank overdrafts and loan facilities are no longer a realistic hope.

Thankfully, the world of funding has been going through a dramatic transformation over the past few years and this has resulted in more choice for start-ups. Whereas the banks used to be virtually the only player in town, there are now numerous other options but please do take professional advice before proceeding with any financial commitment.

How much do you need to start?

You need to calculate your set-up costs as well as the money needed for the early days of trading. Once you have started, there will be ongoing costs that you will have to consider. To calculate how much you need:

Add up total start-up costs

Amount required to see you through the early stages
How much money you have already
Total that you need to raise.

The more money that you can put in yourself, the better. Borrowing usually involves paying interest or giving up a share of your business.

Personal Survival Budget

Sadly, the personal bills continue to come in after you start a business and you need to make provisions for these. Work out your own personal SURVIVAL BUDGET by adding together all of the items that must be paid to keep you afloat in the early stages – these include living costs but NOT lavish entertaining or expensive holidays. (Well, not at this point!).

Survival Budget Template – This free template, from Start Your Own Business, will calculate how much you need to keep on top of your personal finances.

Cashflow Forecast

A cashflow forecast is an essential tool at this stage. This will help you calculate your initial financial requirement as well as the money needed for early days of trading. You will have to think about:

– Actual costs to start – initial purchases.
– Your own personal needs (see survival budget above). – Ongoing cost of running your business.
– Anticipated highs and lows (shortfalls).

Free Cashflow Template – Input your figures to this cashflow template and the spreadsheet will work out all of the calculations.

Most of the major banks’ websites also offer downloadable templates.

Funding sources & grants

In an ideal world, you will have enough of your own money to fund the business without having to rely on any outside sources. The reality for most of us is that is not usually the case. The next best thing is to obtain a grant to plug the gap. Unfortunately, they are very few and far between and are generally for fairly low amounts of money. It is worth spending a bit of time to see if there are any that you can apply for.

If you are in a high-growth sector such as aerospace, clean energy, advanced manufacturing or have an innovative product or services it might well be useful speaking with Boost Lancashire as grants might be on offer.

Failing that, if you still need to raise money, here is a selection of the options that are available to you.

Use your personal assets: Using personal equity, such as savings or remortgaging your house can give you the freedom to run your business your way. However, it is important to be aware of the risk.

Bring in partners: If you’re a sole trader you could consider taking on partners to raise finance. You’ll need to negotiate what share of the profits each person will receive, agree how decisions are going to be made, and decide who is going to take on responsibility for the roles within the new business.

Persuade customers to pay upfront: Larger organisations can sometimes be persuaded to pay upfront to fund a project or product you are developing if they need it for their own business. It may also be worth offering more favourable terms to customers who are prepared to pay a deposit in advance.

Friends or relatives: ‘Friends, Family and Fools’ are a good potential source of investment because they know you and believe in your ability. However, they must understand the high-risk nature of the venture and that there is a chance they might not make as much as they anticipated, or might even lose their investments completely.

Start Up Loans – Borrow up to £25,000 12 months of free mentoring Government-backed.

Start-Up Loans

This Government backed Loan fund has been set up specifically to help start-ups and young businesses (up to 24 months). It is a personal loan but not secured on your property and the interest rate is a reasonable fixed rate.

Asset finance

There are lenders who will allow you to borrow the money, with the loan being secured against the value of the item itself. Often used for vehicle finance but the interest rates can be high.


Personal Loans

Interest rates vary dramatically depending on the perceived risk profile. You can do this online and get instant decisions.



Business Loans

Available from the main banks and online finance providers. They’ll ask you to provide a business plan and a financial forecast. The interest rate can be anything from 4% (usually only with secured loans) to 20% on unsecured loans.


Interest rates can be high and are charged per day you use it, so it’s best not to rely on this option for long term financial needs.

Business Credit Cards

Again, not a good way to borrow long term, but they may be useful for short term funding. You should get a quick decision.

Trade Accounts

Often this will mean that you do not have to pay for the item up front, but can delay the outgoing payment. This is great for businesses who are awaiting invoices to be paid.

Invoice Discounting

Invoice Factoring is similar. This allows you to access the value of your invoice before your client has paid it via a third party. This can effectively plug cash flow gaps.


Someone may wish to put money into your business in exchange for shares, profit share or a directorship. You will usually need to produce a business plan or ‘pitch deck’ to attract their attention.

Business Angels

If you have a business idea that needs to grow quickly and has a good chance of making sizeable profits, you may be an attractive proposition for a Business Angel. As well as investing their own money, you will also acquire their expertise and contacts.


This is a growing type of funding. It does involve a bit of effort on your part in writing up a campaign, publishing and sharing it on social media. There are lots of different websites/platforms.

Peer Lending

This is an ‘any purpose’ loan where individuals or businesses put surplus funds in a ‘pot’ and applicants can then apply for funding from that ‘pot’. Decisions are quick and interest rates are determined according to risk.

Useful Links

Rosebud Business Finance

The Rosebud Fund is designed specifically for Lancashire businesses, offering loans from £10,000 – £300,000 with complimentary business support. This is to assist growing businesses in Lancashire County Council’s administration area and is provided by Lancashire County Developments Ltd (LCDL), which is a wholly owned subsidiary of the council and is delivered by GC Business Finance.


Peer to Peer Lending

Fylde Borough Council has teamed up with Funding Circle to support the growth of local business. Funding Circle enables people to directly lend to creditworthy small businesses, sidestepping the banks. Small businesses can borrow up to £500,000, while investors receive high, stable returns for the long-term.


Access to Finance

Access to Finance provide fully-funded (no cost to access) bespoke finance support for eligible businesses with no fees, commission or introduction costs. Our dedicated finance specialists have expert knowledge of public and private sector funding channels, helping local businesses to identify the most relevant sources of funding and assisting in discussions with potential investors.