Funding for Businesses – A Handy Guide

Funding for businesses can be a minefield. Whether start-up or long-established, businesses can often benefit greatly from a capital boost. Historically the only option was to go to the banks, however nowadays the support both for start-ups and growing businesses is much more varied.

Bank funding still provides approximately 80% of the funding for businesses. Banks tend to be happy to support businesses in principle and have plenty of capital, which they can offer at relatively competitive rates. They are also highly cautious and risk averse, which can be a challenge, especially in the early stages.

Professional assistance can improve chances of success, both with banks and other lenders. We help businesses to put together sound business plans with all the supporting information a lender might ask for. Since a lot of the businesses we speak to are still unsure what alternatives are available to them, we’ve put together a breakdown of what main options are available beyond the high street:


Ok, so we are stating the obvious here, but a lot of businesses start off by self-funding via their owners / directors.  Most successful businesses started out by being funded by their own proprietor, and honestly, there is little chance of any lender taking a business seriously if their own owner isn’t willing to stump up some funds to see it succeed – why should they take all the risk? Starting funds from the founder are often known as the ‘hurt capital’.

Family and Friends

As those who would most like to see your business succeed, family and friends are the obvious first port of call. Having said that, make sure any financial transactions are done fairly, honestly, and officially – money can be the cause of huge fallouts, so it’s best to have some official terms of lending drawn up which cover both the lender and the borrower, and set out proper legal terms for repayment.

Start-up Loan Scheme

With banks sometimes swerving new businesses as they are too high risk, the government launched the start-up loan initiative which offers loans of up to £25000 per owner / director of a business that is either start-up, or less than two years old. The loans are offered at a discounted rate, usually around 6%.


The types of grants available depend on the growth plans for specific regions, and are usually provided through Local Enterprise Partnerships (LEPs). Grants can be available to fund part or whole projects which contribute to regional growth and can provide an excellent source of funding.

Crowdfunding / Peer-to-peer lending

Businesses can also borrow money directly from other businesses, crowds (formed of individuals), or peers. This kind of funding for businesses is usually done via the internet – the P2P lender site puts the borrower in touch with the lenders. Credit checks are completed both through agencies and also often through lenders’ own in-house systems. The good thing about this type of lending is that it can be done for relatively small amounts of money, and given the rise in its popularity over recent years, can now rival banks in terms of interest rates.

Regional lenders

Being Yorkshire-based, the two main local lenders to us are Finance Yorkshire and Business Enterprise Fund. Various government websites have breakdowns of the kinds of funding for businesses available and what businesses might qualify. It may not only be funding that is offered – training, business advice and financial support may also be on offer. Due to be launched in 2017 is the Northern Powerhouse Fund which we will keep our blogs updated on.

Invoice financing (Factoring & Invoice Discounting)

This kind of financing allows businesses to borrow against pending invoices, meaning they don’t have to bridge the financial gulf between the invoice date, and potentially 30 days or more later. The business effectively sells its invoices to what is called a factoring company. The invoice is sent, and payment is usually within 48 hours of up to 90% of the invoice total (different figures are offered by different companies). The factoring companies also take on the responsibility of chasing the payments, and only take payment for their own services once their client’s invoice has finally been settled.

The Late Payment Act dictates that bills must be paid within 30 days, but sadly this is not always the case. Invoice financing removes the risk (for a fee) of late payers having a detrimental impact on the company.

Invoice financing is available through banks, but also through independent lenders, for example Bibby’s, Ultimate, Skipton Business Finance, and the web-based Platform Black.

Asset-based lending

As its name infers, asset-based lending is where security for a loan is given in the form of high value assets. These might include cars, machinery, lorries and property. A mortgage is a prime example of an asset-based loan. There are a huge range of companies offering this kind of finance. Funds are released based on an agreed percentage of the value of the asset in question. With all loans of this type, the asset is at risk if repayment terms are not met, the lender reserves the right to recoup their lending costs by taking possession of the security assets.

Specialist Lenders

When the credit crunch hit in 2008, there arose a selection of specialist lenders who filled the gap left by the banks. Funds relating specifically to property development for example, whether for residential or commercial use, are offered by companies such as Shawbrook, Aldermore, Interbay and Cambridge & Counties.

Some lenders focus specifically on overseas trade, whilst some are purely interested in bridging finance. Bridging loan providers include Together, Lowry, Locally-based Reward & Bridgebank, as well as a huge range of independents, new ones of which are springing up all the time.


More commonly associated with high risk businesses with high growth potential, equity funding from business ‘Angels’ or Venture Capitalists can be an option. In these instances, funds are raised through investors raising funds in return for an equity stake in the business. This kind of funding was brought into mainstream understanding by the ever popular Dragons’ Den.

In summary, there are numerous options available to businesses looking for finance. It can be confusing and time consuming to find the best option, which is why professional advice, such as that given by the team at Red Sky, is usually the best option, and provides the most likely chance of success.

Find out more about funding for a business


Peter was very helpful throughout the CBILS process. We faced a number of issues but he was always there to support us and point us in the right direction.
Steve H
Steve H
16:08 20 Jul 20
Andy from RedSky has been amazing, help throughout the process. Very highly recommended
Alan Talib
Alan Talib
12:08 29 Jun 20
Fantastic to deal with and helped us achieve what we wanted at a very busy time.
Danny Bullement
Danny Bullement
16:14 02 Jun 20
Myself and my husband have been supported by RedSky for over 15 years in our Hi-tech engineering business and we simply couldn't recommend them enough. They will always go the extra mile and beyond and will only find a solution that is totally right for your business, never simply for their gain. Integrity is absolutely paramount for them. They are able to look at the whole of the market for your business solution and are at the forefront of everything that is happening in the business funding world and solutions for SMEs. They really do care about your business.
Claire Summerskill
Claire Summerskill
11:35 30 Jan 20
I have known Martin from Red Sky for a number of years and has been great to work with and obtain the results that we needed. Would highly recommend.
David Grabowski
David Grabowski
11:10 26 Nov 19
Have worked with the Red Sky team for many years. Very professional and thorough approach. Always provide honest and constructive advice. Wouldn't hesitate to recommend their services.
Ian Atkinson
Ian Atkinson
10:56 19 Aug 19
very efficient service easy to talk to and kept informed all the way along great service
Dick Lambert
Dick Lambert
10:45 15 May 18
Fast, efficient and helpful. Would highly recommend!
Lynne Hockney
Lynne Hockney
11:28 12 Apr 18
Gareth at Red Sky understood my business and my funding requirements quickly, he was a pleasure to work with and secured the funding I required. I highly recommend Gareth and Red Sky. If the need arose I would turn to Gareth and Red Sky without hesitation
India Mahon
India Mahon
12:11 17 Mar 18
Fantastic service, quick & efficient 1st class service & always on the end of the phone. Definitely recommend!!
Sue Robinson
Sue Robinson
10:50 02 Feb 18
Without Redsky our business wouldn’t of even got off the ground. Gareth was fantastic in putting our business plan together and doing all the paperwork. We can’t thank you all enough hopefully you can change our life’s. Thank you
Jamie Orr
Jamie Orr
14:12 31 Jan 18