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How to finance a small business

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When it comes to financing a small business, there are a number of options available to owners. The most common method of financing is through personal savings, but other options include taking out a loan, using a credit card, and seeking investors. 

Each option has its own set of pros and cons, so it is important to do your research before deciding which method is right for you. In this article, we’ll explore some of the different ways you can finance your small business.

Funding options for small businesses

There are a range of different funding options available for small businesses. Here is a brief rundown of some of the most popular and accessible funding sources available to those looking at how to finance a small business today.


Crowdfunding is a popular form of small business financing that enables business owners to collect donations from members of the public to build or grow their business, often in exchange for different perks, such as early product releases or exclusive discounts. There are several popular online crowdfunding platforms and almost anyone can sign up to pitch their business or product to users. 

Equity finance

Equity financing is the practice of raising funds for your business by selling shares in the company to investors and the general public. Depending on the percentage of equity sold through shares, shareholders may be entitled to some control over decisions made in the running of your business, which depending on the stage of your growth, could be both a help or a hindrance.

Equity finance for smaller businesses may include angel investment, where an “angel” investor uses their own net worth to fund your business, rather than an investment fund from a venture capital firm.

Small business grant

A small business grant is a financial gift awarded to your business to contribute to its growth. Grants are generally given by the government or by charitable organisations and the recipients are often handpicked for meeting certain eligibility criteria. 

Growth Debt

Unlike equity finance, debt funding works a lot like a personal mortgage in that the sum is repaid over a pre-agreed fixed term. This means that your business incurs no dilution of equity, but also that it must be profitable enough to service the loan, which can be a challenge for small businesses in their earlier stages of growth. 

Invoice finance

One of the key challenges for small, or earlier-stage businesses, is having enough collateral for a lender to use as security for their loan. The beauty of invoice finance is that the lender can use your outstanding payments as this security, advancing you the value of one, or multiple, invoices, which depending on the scale of the late payments can add up to a significant amount!

How to choose the right financing for your small business

Choosing the right source of funding is one of the most important decisions a small business owner can make. Knowing what type of finance is best for your business and its needs can be daunting, but understanding all of your options should help you make an informed decision. 

The first step is to assess how much money your small business needs and when it might need it. This will give you a better idea of what kind of loan or investment to pursue. Additionally, consider whether a loan or investment would best suit your current financial situation. Loans are typically taken out for specific purposes such as purchasing inventory or equipment and require repayment over time with interest, while investments do not require repayment but may offer less flexibility in terms of use – and have the additional downside of equity dilution.

You should also take into account the different types of lenders available and their prior experience and lending history. Some lenders will specialise within different sectors and so may better understand the nuances of your business than others. Likewise, working with lenders outside of the high street banks may offer you more flexibility and agility than you would otherwise encounter on the high street.

Small business funding with Growth Lending

Growth Lending is proud to support UK SMEs across a range of industries, with business funding that is fast, flexible, and reliable.

We work with each of our clients individually to determine what form of funding is best suited to the needs of their business, ensuring they get the capital they need to support day-to-day operation and to access next-growth.

Think your business could be a good fit? Get in touch with one of our lending experts, here.