How to fund your business
Funding is key for a healthy, growing business. A recent report from British Business Bank found that around half of smaller businesses sought external finance – looking for funding outside of your business – in 2025.
Understanding your options, and getting access to funding, can be a challenge. You don’t need to be an expert. But you do need to know about different types of funding so you can make the best decision for your business. Our guide aims to help.
Why businesses need funding
Reasons for needing funding, and the most suitable type, change depending on what stage your business is at.
- When you’re starting out you might need a cash injection to buy equipment, rent premises and take on staff.
- If your goal is to run your business stably and smoothly, you might need funding to manage your everyday cash flow or an unexpected expense.
- If you want to grow your business you might need to put more money into it to upgrade technology, develop a new product or launch a marketing campaign.
Different types of funding
Below are some of the most common funding options, along with their benefits and things to consider.
Bank loan
A bank loan will give you a lump sum of money that you’ll pay back in instalments with interest, normally over a number of years. You keep full control over your business and can decide how best to spend it. It can be used to support cash flow, or for a big spend to grow your business. You’ll need to consider if you’ll be able and willing to pay the loan back over the term. Any late or missed payments could have an impact on your credit file.
Overdraft
An overdraft allows you to borrow up to an agreed limit on your business bank account. It’s a flexible option, as you only borrow what you need at the time. It can be used when you need to boost your cash flow, or if an unexpected cost comes up. It can be expensive compared to other borrowing options, especially over longer periods.
Credit Card
A business credit card allows you to spend up to an agreed limit. It can be used to manage your cash flow, or for unexpected bills. You can also give employees cards linked to a single account to be used for expenses. Itemised statements can help you monitor spending and simplify accounting. Like an overdraft, it can be expensive compared to other borrowing options, especially over longer periods.
Equity finance
This means selling shares in your business to investors. Like a loan, it’ll give you a lump sum of money that you can use to grow your business. Unlike a loan, you won’t have to pay the money back, but you’ll need to share the profits your business makes, and you may risk diluting control. As well as cash, investors can bring experience, strategic guidance and contacts to help you reach your growth ambition.
Government-backed loans and grants
The Government back several start up and growth initiatives. Loans can be easier to secure, and terms can be more favourable, than traditional bank loans.
Grants don’t need to be repaid. But most are for new businesses rather than established, and criteria and applications for applying can be complex.
Personal or business funds
It’s also possible to go it alone and use personal savings to start your business. Profits can then be pumped back into your business to help it grow. It gives you full control over your business. And you don’t have to pay out any interest, fees or charges that can come with external funding. There is personal risk involved, and limited funds could impact growth potential.
More support
Ready to explore external funding? You’ll need to do some preparation. Read our Get ready for funding article for help.
Review our range of borrowing and finance options
British Business Bank have lots of articles with more information on business finance. They also have a finance finder tool that can help you with potential finance options.
If business finances are a struggle for you at the moment please visit our support page
Small Business Finance Markets Report 2026 | British Business Bank
