Finance · 18 October 2018

6 business funding options to get your startup up and running

Alternative lenders are transforming the financial landscape for startup businesses
Donna Torres, director of small business at?Xero, helps startup founders understand the different business funding options available for new companies.

Fundraising is essential for getting small businesses off the ground. If you’re just starting out, it can also be a huge challenge. Plan where to source money from in order to fund your business and have a list of financial goals in order to make it a success.

According to the?Office for National Statistics, six in 10 businesses won’t see their fifth birthday, and research from?Xero‘shows that of those who failed, over half (65%) blamed financial issues such as poor access to capital as the reason why.

While banks are usually the first port of call to get hold of capital, they arent the only solution.. Nowadays, there are more options to help small businesses, including alternative lenders such as iwoca or MarketInvoice. Open Banking is also a great catalyst for this transformation.

Here are some of the ways small businesses can get hold of that all-important cash:

Business funding

Not all businesses can get every type of finance. For starters, you can’t sell a stake in your business if you’re a sole trader or a partnership. And you can’t issue share documents unless you’re a corporation. The idea at the core of your business will also affect your business funding options. For example, traditional lenders like banks don’t tend go for outside-the-box ideas.

There are lots of business funding options, but they fall into these main categories:

  • Debt (lending) Where you borrow money and pay it back, generally with interest
  • Equity Where you get cash by selling a part of your business to an investor
  • Presales Where customers pay before you’ve created the products or services they’re buying
  1. Alternative lenders

Alternative lenders are transforming the financial landscape for the better. By using new data sets and developing technology, there are now many more options to help small businesses, including Open Banking.

MarketInvoice, iwocaand?Satagocan analyse your data to determine the risks involved, and work out what’s right for you, at the right time. Then you simply need to authorise banks and other licensed firms to access transaction history.

  1. Revenue-based financing

Revenue-based financing (RBF) has grown in popularity in recent years. This fundraising option is perfect for small businesses with a lack of hard assets, looking to grow quickly.

Investors inject cash into a business and in return, future gross revenues will have a percentage taken off and given back. The gross revenue will continue to have deductions made until the initial capital amount has been paid, plus the agreed interest.


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  1. Crowdfunding a business



Donna Torres is the director of small business at Xero UK. Having held previous management positions at a variety of product companies, Donna joined Xero in 2014 and has been part of Xero's growth from its early stages in the UK. Donna believes that the biggest challenge facing small businesses today is HMRC's Making Tax Digital for VAT initiative, alongside the impact of late payments on cash flow both of which Xero is supporting SMBs with through its technology.

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