When thinking about carrying out a company formation and running a new business in the UK, your main worry may well be finance. Every business necessarily needs money to get off the ground and to keep running into the foreseeable. A great deal of businesses fail in the first year. So it can be a scary thought, taking the risk. However, the benefits often outweigh the risks and many other businesses before you have managed it, so why can’t you? Luckily, the government is keen to help small business thrive.

They are offering a number of grants, tax reliefs and other sources of help to support new companies and their continued growth. These aren’t the only options. There are a number of financing options available to those entrepreneurs who need them. Which is suitable for you will depend on both your circumstances and your intention. Every business is different.

Below is a list of the top 5 popular ways to finance a new business. It’s not necessarily definitive, but we hope you will find it useful.

1. Raiding the savings

Many new companies start this way. Using savings, borrowing from family members or maxing out personal credit cards as a way to kick start a business venture. It can be a risky undertaking, but may pay off in the long term.

2. Bank Loans

Using a bank loan is probably the second most common approach adopted by new companies. With a suitably prepared business plan and sufficient security a company may be able to acquire a substantial loan from the high street banks. The downside is the interest rates a company will be likely to pay and the length of repayment, meaning a long term cash flow burden on a growing company.

3. Grants

A number of grants are available for new companies, from a variety of sources. Local authority, European Union and general government. They are usually granted for specific criteria for the advancement of business which the authority deems to be in their interest. As such, grants are often harder to obtain than other sorts of finance, but are preferable due to their nature. Grants for things like Research and Development can be found via the Solutions for Business scheme provided by central government. A number of finance “products” are available under this scheme, including the Enterprise Finance Guarantee which offers help to those businesses seeking loans that might not otherwise be able to acquire them. Advice on these financing options can be found using your local Business Link office.

4. Factoring

Certain businesses may be able to take advantage of this finance method. Factoring is quite simply a transaction under which a company sells invoices to another business in order to acquire funding quickly. Usually the invoices are sold at a discount to the other business who then recovers the debt. It necessarily means that the business makes a loss, but also allows swift finance which can be used in the short term to cover debts or finance new projects. In some industries this is a very common occurrence and perfectly normal practice.

5. Business Angels/Venture Capitalists

These are wealthy individuals who are specifically looking to invest in new companies and fresh ideas. They may be able to invest large amounts of money in the right project but in turn will likely want a share of the business or some level of input into how it is run/managed. This can be off putting for some new business owners who want to run it their own way, but at the same time, the experience and knowledge may be of great benefit to a new company in the early stages of growth.