How to get funding for your business idea: a seven-step guide
Most business ideas need funding to get started. But securing cash isn’t just about filling in a loan application and hoping for the best. We show you how to position your idea so it appeals to lenders and investors alike.
When inspiration strikes and a business idea forms in your mind, it’s tempting to rush ahead in a bid to get it moving. Speed matters, but in business, you need to walk before you can run.
When you apply for funding — whether it’s from a high street lender or an angel investor — success depends on how well you convince others your idea can work. You need to define and explain your business plan, target market and proof of concept in a way that helps potential backers see your vision.
By following these seven practical steps, you can help secure the funding you need to bring your business idea to life.
These unsecured and secured loans could help you grow your business, cover running costs or even fund a new company.
1. Validate your business idea
Once you have a business idea, you need to explore its potential in detail. This helps investors and lenders see that it’s a credible idea and that people are going to pay for what you offer.
Here are a few low-cost ways to test and validate your idea:
Research the market – Use tools like Google Trends to see whether people search for things related to your business idea, then check social media platforms and forums such as Facebook or Reddit to understand customer needs and problems. You can also review competitor websites to check their prices and customer reviews to spot opportunities
Talk to potential customers – Gather feedback through simple surveys on sites such as SurveyMonkey. You could also conduct interviews or run focus groups to test whether your idea solves a real problem
Build a simple prototype or minimum viable product (MVP) – Create a low-cost version of your product or service to test interest and gather early feedback. You don’t need to spend a fortune – you can create mock-ups or wireframes using free tools such as Canva, or set up a quick web page that outlines your business offering, enabling you to capture interest via sign-ups. You could also pilot your service and deliver it yourself manually before gradually scaling it up
Check viability – Estimate whether your idea can generate enough revenue to cover running costs and ultimately grow to make a profit. Break down essential expenses, the revenue potential of your idea and its scalability
2. Define your market and audience
To convince lenders your idea has potential, show them exactly who’s going to buy it. Avoid saying everyone is a potential customer – if you sell artisan sausage rolls, you probably won’t appeal to vegetarians.
First, define who your ideal customer is. Think about their age, income, location, lifestyle and buying habits. This helps you create a customer persona that enables you to sketch out profiles of your target audience and visualise their needs and any problems they may face.
Once you have an idea of your customer, use tools such as Google Trends or government data to estimate how many potential customers you could reach. It’s a good idea to study your competitors at this point, too. Look at who else is selling to a similar audience and ask yourself what they do well and what gaps you can fill.
3. Work out how much cash you need
Before applying for funding, it’s important to know exactly how much your business needs to get started. Asking for too little could leave you short, while asking for too much might make your proposal seem unrealistic.
Start by listing your essential startup costs, which may include the following:
Equipment
Stock
Software
Marketing
Insurance
Any licences you need
Then factor in your running costs, such as rent, bills and salaries (including your own). Once you have a rough figure, add a buffer. Unexpected costs inevitably come up, so include a safety margin to avoid running out of money.
It helps to set your calculations down clearly. Lenders and investors may want to see them, because it gives them confidence that you understand where every pound is going.
4. Map out potential funding options
Applying for startup funding can be quite intimidating, and knowing where to begin isn’t easy. Focus on the type of funding that aligns with your business to avoid going down the wrong path. Some options require repayment, others need you to give up equity in your business. What’s best for you depends on your preferences.
Here are some of the most common options and how they can be used:
| Type of funding | What they let you do |
|---|---|
| Business loans | Borrow a lump sum from a bank or lender and repay it with interest over time. Many lenders offer specific startup loans, too |
| Business credit cards | Cover short-term expenses and manage cash flow with flexible repayments |
| Invoice finance | Unlock cash tied up in unpaid invoices by borrowing against their value |
| Asset finance | Spread the cost of equipment or vehicles instead of paying up front |
| Business line of credit | Access funds up to a set limit and only pay interest on what you use |
| Government funding and grants | Apply for support schemes that provide funding that doesn't need to be repaid |
| Crowdfunding | Raise money from multiple backers online in return for rewards, equity or interest |
| Angel investors | Secure investment from individuals who offer cash and expertise in exchange for equity |
| Peer-to-peer (P2P) lending | Borrow from individual investors via online platforms, often at competitive rates |
| Bootstrapping | Fund your business with personal savings or revenue, keeping full control but limiting the cash available |
5. Write a business plan
Now it’s time to bring together everything you’ve learned so far about your idea into a single business plan.
A good business plan template shows lenders and investors that you’ve thought through every aspect of your idea. It proves you understand your market, that you know how your idea can make money and that you have a plan for growth.
Keep your business plan realistic and easy to follow by including the following:
Executive summary – A clear overview of your business idea and your goals, and how you plan to achieve them
Business description – What you do, what problem you solve and what makes you different from the competition
Market analysis – Who are your customers? How big is the opportunity? What are your competitors doing?
Products or services – What you’re selling and how it benefits your customer
Marketing and sales plan – How you intend to both attract and retain customers
Operations plan – The day-to-day structure, including suppliers, staffing and workflow processes
Financial plan – Forecasts for revenue, costs, profit and cash flow
Funding needs – How much money you need and how you plan to use it
6. Prepare a pitch deck
A pitch deck is a short presentation that brings your business idea to life. Keep it clear, visual and no more than 10 to 12 slides.
It helps to focus on the essentials investors care about. Think about the problem you’re solving, the solution you offer, the size of the market and how you plan to make money. Show any traction you’ve already achieved and be transparent about your finances and funding needs.
Keep your pitch deck light on text and use visuals where possible to make it as engaging as you can. The aim is to spark interest and start a conversation – not overwhelm with the finer detail.
7. Network
Networking is a vital skill for any entrepreneur – whether it’s to woo a potential investor or glean insights from a business expert.
There are lots of networking events up and down the country, many of which are free. You can also join industry groups such as the Federation of Small Businesses (FSB) and connect with investors online through platforms like LinkedIn.
Research who typically invests in businesses like yours, so you target the right people. When you do approach anyone, keep it concise, professional and tailored to their interests.
Building trust and credibility takes time, but it also makes it more likely they’ll back your idea when the moment arrives.
FAQs
What does startup capital mean?
Startup capital is the money you use to launch a new business. It covers the upfront costs of getting started, such as equipment, stock, marketing and staff. You can provide this cash yourself from your savings, borrow it or raise it from investors.
Can I just sell my business idea to a company or investor?
Yes and no. While you could sell your idea before getting it off the ground, there’s a good chance you’d miss out on the overall value of your idea. It’s unlikely that a company or investor would pay the ultimate value your business idea could generate if you were to focus on it yourself. Also, most investors are looking to invest in a person and the execution of their idea – a tested concept, a clear plan or a working product that proves the idea can succeed. If you want backing, focus on developing your idea into something tangible that shows real potential.
How can I protect my business idea from being stolen?
You can’t stop others from having similar ideas, but you can protect the way you develop and present yours. Use non-disclosure agreements (NDAs) when sharing sensitive details, and register trademarks, patents or designs if they apply to your product. It’s also sensible to keep thorough records of your work to prove ownership.
What can I do if I have a startup idea but no money?
You can still move your idea forward without facing large upfront costs. Once you’ve validated your idea, look for free or low-cost resources such as government grants, startup competitions or local enterprise schemes to fund it. Failing that, consider using personal savings or working part-time while you build your business up. You can also explore crowdfunding or approach friends and family for early support. The key is to gain traction on a small scale first, which makes it easier to attract larger funding later.
About Kyle Eaton
Kyle is a finance writer specialising in all things related to small and medium enterprises (SMEs). He has over ten years' experience working in financial services.