Britain continues to produce more entrepreneurs than any other country in Europe. Figures from 2015 – the latest year that figures are available – show that close to 600,000 new businesses were registered with Companies House, a rise of almost 10% on the previous year. Most of these businesses were small enterprises launched by just one person. Very few were larger scale businesses led by groups of directors.
Millions of us dream of starting our own business but shy away from what can be a hugely liberating experience because of a lack of finance. But not having the money in the bank does not have to spell the end of your dream of going it alone because there are still many forms of financial help on offer.
In this article, we look at the different forms of finance available to you if you want to step out on your own.
Grants and loans
Originally targeted just at younger entrepreneurs, the government’s Startup Loans scheme is now open to anybody from any age. If you’ve got a great idea for starting a business, then you could apply for a Startup Loan of up to £25,000 with the money being repaid over a period of five years at an interest rate of 6%.
The scheme is run by James Caan, the former star of Dragons’ Den and offers free business advice to those who successfully apply for a loan.
People who are looking for work and are receiving Jobseekers’ Allowance are eligible to apply for the Enterprise Allowance Scheme to help them set up a new business. Your local JobCentre Plus will be able to advise you on whether you might be eligible for this scheme and, if you are, pass you on to a specialist who will take you through the process. Your idea will be considered and, if successful, will qualify you for an allowance of up to £1,274 which will be paid over six months. On top of the financial help, the Enterprise Allowance also includes business mentoring.
Other loans and grants
There are plenty of other grants and loans available to entrepreneurs. If you are a young person with a great idea for your own business, you might like to check The Prince’s Trust to see if you are eligible for financial assistance.
Despite cuts in funding from central government, many local authorities continue to offer startup loans and grants to help businesses get off the ground. There is a great resource on all of Britain’s local authority grants at the website BetterBusinessFinance.co.uk.
If you’ve already got some financial investors or you are looking to attract some, then you might want to consider the Seed Enterprise Investment Scheme. This scheme allows investors who put up to £100,000 into a new business to claim generous tax relief. But this scheme is only available to new businesses who have been trading for less than two years.
Despite the ongoing squeeze in consumer and business credit, a lot of the high street banks continue to offer funding to new businesses. Overdrafts and loans are available at relatively low interest rates to those entrepreneurs who are able to present a good idea backed by a sound business plan which many of the banks will help you to draw up.
This may be a relatively young way of funding a startup but crowdfunding is big. In 2013, crowdfunding sites raised more than £500 million for small businesses in the UK. Sites such as Seedrs and Crowdcube let investors buy equity in a startup that needs money to get going.
The most mature site – Kickstarter – lets businesses ask for contributions towards the cost of setting up in return for benefits like discounts on products or services. There is no financial return on offer.
Where is the best place to start a business?
As you would expect, the capital is the centre of business growth in the UK. Every year, there are up to 100,000 business startups in London thanks to its excellent communications, transport links and huge pool of skilled labour. Many of those who start businesses in London are from overseas. But London also has the highest rate of business failures in the UK with roughly one in 10 of enterprises failing each year.
Oliver Jones has written for Solution Loans since 2015. His passion for personal finance comes through in the 150+ blog posts he's written since that time. His talent for explaining all things money means he's covered topics as diverse as...Read more about Oliver Jones