What alternative sources of funding can I access?

Loans or overdrafts might not be right for everyone but that’s not the only path to securing funding

What alternative sources of funding can I access?

If you feel that your business is not ready for a loan or overdraft or if your bank or other lenders are not able to offer you funding, then don’t despair, there are alternative routes if you need to borrow money right now to seize a big opportunity or get your company through a bumpy patch that you know will pass.

You may be able to find a short-term solution, although you may have to consider some less traditional financing options. You should also give some serious thought as to whether debt is affordable for you just now.

If a lender or your bank have said no then you should consider your circumstances carefully. Perhaps you can even talk to your peers or find a mentor within your industry to discuss your plans with and get that outside perspective.

And if you’re sure your business can afford to borrow and needs it now to grow, then there are some options you could consider, including:

  • Friends and family
  • Releasing equity, to business angels or through crowd funding
  • Accelerators
  • Grant funding
  • Alternative funding options

More details on these potential paths are provided below, including when you might consider each of them, depending on which growth stage you are at:

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Friends and family

If you’re in the early stages of your business adventure then friends or family members can potentially be a source of early finance if other avenues are unavailable. Let’s face it, no-one knows you better or has stronger belief in you and your capabilities.

Getting a loan from your friends or family may well give you more flexible terms (by when you need to repay) and lower interest rates (perhaps even zero if you are lucky). However, borrowing from your nearest and dearest isn’t without its risk though and so you should make sure of the following:

  • Be just as clear with them as to what you need and why as you would your bank.
  • Put the details of the arrangement in writing, so there are no misunderstandings at the outset or later – you could consider having an accountant or solicitor take a look at this document before it is signed.

If this is an investment, rather than a loan, such as if you are exchanging any equity in the business for this money then do ensure that a lawyer or accountant helps you write up the agreement.

Be mindful that the repayment of gifts from friends and family may be factored into future lending affordability assessments.

Business angels

If you are looking for more significant funding in the early stages of your business, then angel investors can sometimes be found who provide money into businesses and business models the believe in, in exchange for a proportion of the equity (shares) in your business.

Typically such investments are used by fast growing companies to finance growth over the medium to long term. Unlike debt finance, the money provided is not paid back to the investors, however they will be looking for a return on the capital invested over time.

To raise equity finance this way, requires you to identify and pitch to investors, which will take time to be credible and you need a robust business plan, including financial projections. Do look for investors who might provide additional support as well such as mentoring, or who have great networks in your areas of business.


Crowdfunding has become very popular in recent years as it gives businesses the ability to raise funds from large numbers of people, and those people are also likely to be buyers of your products.

You can consider:

  • Equity based crowd funding where the individual investors will all be providing money for a proportion of a share of your business
  • rewards based crowd funding where people pledge money to your business in exchange for perks or products or services from your company

Some examples of crowdfunders include:

  • Seedrs – Raising funds from idea-stage start-ups to well established organisations
  • Kickstarter – Exists to help bring arts and creative projects to live
  • Indiegogo – Focussed on clever innovations in tech, design and more, offering perks to early adopters
  • Crowdcube – Helping businesses at every life-stage through equity and debt options
  • Fundable – Thousands of startups have used this service to launch their fundraise


Accelerators combine seed capital and mentoring services, over between 3 and 6-month programmes that can culminate in a pitch day where start ups pitch to suitable investors.

Some accelerators offer working space, mentorship support and collaboration with other startups on the program, instead of capital. Some are backed by large corporates who are interested in tapping into innovative ideas.

Alternative funding options
There are a number of different types of finance that may help you find the money you need.

  • Merchant Cash Advance (MCA) – funding provided through an MCA product, typically for retail type businesses, is repaid by paying the lender a percentage of your card and online takings, as they come in, so that your repayments are balanced with your income
  • Invoice Finance – with this solution you can borrow money against invoices you have raised with your customers, and the debt is then repaid as those invoices are paid to you
  • Flexible Credit Lines – these solutions are like an overdraft facility and allow you to repay the money borrowed in short timeframes if you are able to. This reduces the overall cost of the funding
  • Business Credit Cards – using these solutions can give you up to 56 days of interest free credit, if you are able to repay the money used in full

In addition to those options above, you could research to see if any grants are available to your business. Different grants are available to businesses of all shapes, sizes and sectors, ranging from regional funds from Local Enterprise Partnerships in your area and grants to support growth, through to those that are established to support businesses in specific sectors or linked to innovation in particular areas such as education, agriculture or green energy as examples.

Applications for grants can tend to be quite lengthy and time consuming, but there are also specialist companies which you can find that can support you in writing an application, having helped many other businesses do so in the past.

Did you find the content in this page useful?

We are working with Lloyds Bank, to help you understand what banks and lenders are looking for when you are applying for finance. We want you to decide when you are ready to apply for finance and to do so successfully.

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