Choosing the right types of funding

Good fit for: Cash flow loans, credit cards, angel investors.

Which is the best fit partly depends on your industry. Banks are reluctant to lend to businesses without plenty of assets, so it’s hard for those in hospitality or tech to get secured loans. Some lenders look at cash flow — useful for businesses not yet making a profit but with high turnover.

Many banks and other lenders offer various incentives and fee structures for small businesses.

Cash flow loans

These are backed by your expected cash flow, not your assets. They’re usually used to help a business cover operating costs for up to a year.

If you’re new to business, loans might be the easiest way to get funding. You’ll still need to do some legwork to apply — and set time aside for business planning to make sure it’s the right decision for you.

Shop around for a loan that offers you the lowest interest rates.

Banks will need proof you can afford your repayments. If you’re new to business, you will most likely need to apply for a personal loan or extra borrowing on a mortgage. Once your business is more stable, other options are likely to be available.

Credit cards

Business credit cards are useful for smaller purchases.

Like bank loans, different banks offer various rates and perks. Compare terms and conditions, eg annual fees, interest rates, finance changes and cash advance options.

Your business credit card doesn’t need to come from the same bank you take a loan from or use for your personal finances — but it often pays to build up a good history with one bank. Banks might be more inclined to give better offers to clients they know and trust.

Advice on borrowing money(external link)

Angel investors

An angel investor is a successful entrepreneur who puts money into innovative new businesses, particularly those run by a person or team they believe in.

They typically pick businesses in their field of expertise so their knowledge and experience can help it succeed.

They might:

• Loan you money, which you will need to pay back under their terms and conditions.
• Take a percentage of your profits.
• Ask for partial ownership of your business.

Tips to get investors on board(external link)

Cash flow loans, Credit cards and Angel investors – upsides and downsides