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To get your startup off the ground, you’re going to need some money in the bank to provide your startup capital. But how much cash do you actually need to start trading? And what are the best lending channels to explore when it comes to funding your startup business?

Christopher Blunn, Partner at Haines Watts London, looks at the key ways to finance a new business, and why a flexible funding strategy adds value.


Knowing how much money is needed

Cash is king when you’re in the early stages of developing and stabilising a business. But many startup owners over-estimate the amount of funding and capital that’s needed to actually get their enterprise up and running.

The cost of starting a business nowadays, especially a tech startup or digital service-based business, is so much lower than it used to be. You don’t need to spend a fortune to begin trading in these digital times.

You can run your business from a phone and laptop and be up and running very quickly.

So, as the startup founder/s, it’s important to think carefully about how much money you actually need. Ask yourself:

  • What are our monthly and annual budgets likely to be?
  • Do we need office space or can we work remotely?
  • What are our overheads and operational costs?
  • Do we need employees or can we get the job done on our own? What’s the opportunity cost of spending your own time vs the cost of buying others’ time?
  • How much will we need to get to the Minimum Viable Product (MVP) stage?

The important thing is to drill down into why you need the money, and to come up with a reasoned and realistic number – so you know how much borrowing or equity will be needed.


Which financing option should you choose?

Once you have a sensible idea of the money that’s needed, you can start to work out your financial position in more detail.

You may have been putting your own personal money away to kick start the business, or you may be starting with zero in the bank. So, it’s important to weigh your predicted budget against your current capital to see how these two figures compare.

The two key questions being:

  1. Is there a funding gap?
  2. How big is this funding gap?

With a more drilled-down understanding of the size of your funding gap, you can then look at the various funding options available.

These will include:

  • Your own savings – many successful businesses have been funded initially by the founders own personal investment.
    Friends and family investment – investment from family and friends is a common avenue for financial help. Borrowing money from those close to you is usually less stressful than convincing the bank manager, but it may mean offering shares to your investors and entering into financial arrangements that could affect your personal relationships with family/friends further down the line.
  • High street bank loan or lending – applying for an overdraft extension, or taking out a business loan, are common ways to eke your cash out a little further. But with physical branches being closed at a rate of knots, and banks cutting back on small business lending, the days of the bank manager as the ‘go-to lender’ may be numbered.
  • Small business finance specialists – the opening up of the funding market over the past decade means you have a host of options when it comes to business finance. Funding Circle, iwoca and Capitalise all offer straightforward, low-risk ways to borrow money and access the cash you need to get started.
  • Crowdfunding and pre-buying your product – crowdfunding sites, such as Kickstarter, have revolutionised the funding market. Rather than asking your bank for initial funding, you can crowd-source your financing and ask for investment from the general public. By selling your product at the development stage, and then using this money to complete the MVP stage, you create an early revenue stream – and raise awareness of your new brand in the marketplace.
  • Private equity and venture capital – if you’re looking for serious amounts of cash then private equity is a route worth investigating. Private investors are always on the lookout for the next unicorn, but they’re also likely to want a large share of your potential profits and plenty of control over the direction of the business.

This isn’t an exhaustive list of funding channels, but it gives you some sense of the increasing choice that’s now available.


Creating a flexible financing solution

With so many different routes to funding, you might think that getting the cash you need is a piece of cake. But my experience of working with startup businesses has taught me that there’s no one ‘silver bullet’ when it comes to funding.

The key is to have a solid startup business plan behind you, and to plan the financial needs of the company from Day One through to Day 1,000.

By looking at each stage of your development – from MVP, through to scaling up and beyond – you can assess the risks, forecast your budgets, cashflow and revenue and see exactly where the cash holes are likely to appear over time.

This foresight makes it easier to think about the different types and amounts of funding you might need to access, and to pull this into a flexible funding plan for the business.


Opting for debt or equity

One major consideration when you’re thinking about funding is the ‘debt or equity’ conundrum – and each route has its pros and cons for the future of the business.

In short, the key differences are:

Debt – when you take out a business loan or borrow money from a provider like Funding Circle, you are entering into debt. By incurring this debt you get the cash needed to action the next stage in your development. But you also add to the underlying liabilities on your balance sheet – and a large debt sat in your accounts could affect your company value further down the line.

Equity – when you accept investment from friends/family or from private investors and sell them shares, that money is classified as equity on your company balance sheet. Private investment can be an excellent way to raise large sums of money, but it also hands an element of control over your business to other shareholders.

There are benefits to both options. Debt keeps you in sole control of your destiny, but going the equity route has the added value of bringing experienced business people into the business – something that can expand your expertise and professional direction as a startup.


Helping you maximise your funding

Once you have your money in the bank, it’s important to manage your finances in the most prudent and effective way.

Working closely with your accountant helps you track your budgets over time in solutions such as Xero or business dashboard apps like Spotlight Reporting. You can also create customised cashflow projections to forecast the future cash position.

As a brand new founder, it’s likely that you won’t know the signs to look for when it comes to financial performance. Are you doing well? Or are you performing badly?

We can help you understand your balance sheet, your profit and loss (P&L) and cashflow, so you can put numbers into context and fully understand your core financial drivers.


Talk to us about funding your startup.


Haines Watts is a firm of London accountants working with startups and established owner managed businesses. 

Want to know more? Call us on 0207 025 4650 or email

About the author

Christopher Blunn

Christopher has worked with owner managed businesses for over 10 years, providing both financial compliance and business advisory services.

He specialises in working with high-growth startups and entrepreneurs across a wide range of sectors, with a particular focus on fintech, AI, and the media and creative sectors.


I love the pace of working with fast growth businesses and ambitious entrepreneurs. Working daily with business owners allows me to bring my own passion for all things technology to help them achieve their goals.

If I wasn't doing this I'd be: following the summer around the world.

Favourite book: The Seven Habits of Highly Effective People.

Dream Location: London in the summer.

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