Starting a business often requires money before the business has had the opportunity to generate it.

You may need to purchase equipment, secure premises, buy stock, build a website, recruit employees or fund marketing before your first meaningful sales arrive.

This creates one of the biggest challenges for new businesses:

How do you fund a company that doesn’t yet have years of accounts and trading history?

While established companies typically have more funding options available, Startup Business Finance is still possible.

At Principal Business Finance, we work with a wide panel of commercial lenders and can help startups and newly established companies explore Business Loans, Asset Finance, Vehicle Finance and other commercial funding options.

The key is understanding what the money is required for, how much is needed and what evidence can support the application.

What Is Considered a Startup Business?

The definition of a startup can vary between lenders.

Some commercial lenders may consider any company with less than:

12 months’ trading history

to be a new-start business.

Others may have different requirements.

A newly incorporated limited company with no trading history will generally be assessed differently from a business that has already been trading for nine months and generating consistent revenue.

This is important because startup finance isn’t one single product.

The funding available can depend on:

• How long the company has traded
• Director experience
• Amount required
• Purpose of the finance
• Personal and business credit history
• Existing turnover
• Business plan and forecasts
• Assets being purchased
• Director investment
• Security available

The stronger the overall commercial picture, the more options may potentially become available.

Can a Startup Get a Business Loan?

Potentially, yes. However, securing a Startup Business Loan can be different from borrowing as an established company.

An established business might be able to provide:

• Several years of accounts
• Historic profitability
• Management accounts
• Established bank statements
• Existing customer relationships
• Proven cash flow

A startup may not have any of these.

The lender therefore needs to assess the application using other information.

This could include the directors’ experience, personal credit profile, business plan, forecasts and how much money the owners are personally investing.

In simple terms:

The less trading history available, the more important the rest of the application can become.

What Can Startup Business Finance Be Used For?

Starting a company can create a surprisingly large capital requirement.

Funding could potentially be required for:

Equipment

Machinery, tools, computers, catering equipment, manufacturing equipment, specialist technology and other assets.

Vehicles

Vans, cars, HGVs, specialist commercial vehicles and other transport.

Stock

Retail products, raw materials, components or inventory required before trading begins.

Premises

Deposits, initial rent, refurbishment and fit-out expenditure.

Recruitment

Initial wages and employment costs while the company establishes revenue.

Marketing

Website development, advertising, branding, signage and launch campaigns.

Technology

Software, CRM systems, IT equipment, telecommunications and cybersecurity.

Working Capital

Providing liquidity to cover day-to-day costs during the early stages of trading.

The right finance structure will depend heavily on what the money is actually being used for.

Startup Business Loans for Working Capital

One of the most common requirements for a new company is working capital.

Imagine a new business needs:

£50,000 to launch.

That might consist of:

• £15,000 stock
• £10,000 premises costs
• £10,000 marketing
• £10,000 initial wages
• £5,000 general working capital

A suitable Business Loan could potentially provide the capital required to get the business operational.

The lender will want to understand how the money will be used and, importantly, how the business expects to generate enough cash to service the repayments.

A clear breakdown of the funding requirement can therefore strengthen the commercial rationale behind an application.

Asset Finance for Startup Businesses

Not every startup needs to borrow a large lump sum.

If a significant proportion of the startup cost relates to machinery, vehicles or equipment, Asset Finance may potentially be more appropriate.

Imagine a new manufacturing company requires:

£150,000 of machinery

plus:

£50,000 of working capital.

Using a £200,000 Business Loan to fund everything may not necessarily be the only option.

Instead, the company could potentially explore:

Asset Finance for the £150,000 machinery

and:

A Business Loan for the £50,000 working capital requirement.

This can match the funding product more closely to the expenditure.

Hire Purchase for New Businesses

Hire Purchase can potentially allow a startup to spread the cost of eligible assets over an agreed period.

This could include:

• Machinery
• Construction equipment
• Catering equipment
• Manufacturing equipment
• Commercial vehicles
• Specialist equipment

Typically, the business pays a deposit and the lender funds the remaining purchase price.

The business then makes regular repayments over the agreed term, with ownership transferring subject to the terms of the agreement and completion of the required payments.

For startups, lenders may request a larger deposit or additional support depending on the circumstances.

Vehicle Finance for Startups

Many businesses simply cannot operate without vehicles.

A new construction company may need vans.

A logistics startup may need commercial vehicles.

A mobile catering business may need a food truck.

A landscaping company may require pickups and trailers.

A startup could potentially use Vehicle Finance or Asset Finance rather than using a large proportion of its launch capital to purchase vehicles outright.

This can allow more cash to remain available for:

Stock. Wages. Marketing. Fuel. Suppliers. Insurance. Working capital.

For a young business, preserving cash can be particularly important.

Funding New Premises and Fit-Out Costs

Starting a physical business can require substantial upfront expenditure.

A new:

Restaurant

Gym

Salon

Retail shop

Office

or:

Manufacturing operation

may need to fund deposits, refurbishment and equipment before opening.

A restaurant, for example, could require:

• Kitchen equipment
• Furniture
• EPOS systems
• Refrigeration
• Extraction
• Signage
• Initial stock
• Staff training
• Marketing
• Working capital

Rather than treating this as one large funding requirement, it may be possible to separate eligible assets from general startup costs and explore different finance products for each.

How Much Can a Startup Business Borrow?

There isn’t one universal maximum.

The amount available depends on the lender and strength of the application.

A business seeking £20,000 will naturally present a different risk profile from a newly incorporated company requesting £500,000.

Lenders may consider:

• Amount being requested
• Director contribution
• Business model
• Director experience
• Credit history
• Forecast revenue
• Expected profitability
• Security
• Asset values
• Contracts or orders
• Affordability

A startup seeking a significant facility with no owner investment, no industry experience and no confirmed customers may naturally be more difficult to fund.

Conversely, an experienced director launching a business in a sector they know well, investing their own capital and already holding customer contracts may present a very different proposition.

Director Experience Can Matter

When a company has little history, the people behind it become particularly important.

Imagine someone has spent 15 years running construction projects and decides to establish their own construction company.

The limited company may only be three months old.

But the director isn’t necessarily inexperienced.

They may have:

• Extensive sector knowledge
• Existing customer relationships
• Supplier relationships
• Industry qualifications
• Management experience
• A strong network
• Confirmed contracts

Providing this information can help a lender understand the wider story behind the startup.

Your Personal Credit Profile May Be Important

With established commercial finance, lenders can often rely heavily on the company’s financial performance.

For a new business, that information may not exist.

As a result, the directors’ personal credit profiles can become more important.

Depending on the lender and product, searches may be carried out against directors and personal guarantees may be requested.

Factors such as:

• CCJs
• Defaults
• Missed payments
• Existing personal borrowing
• Previous insolvencies

could influence lender appetite.

This does not necessarily mean funding is impossible, but it can affect which lenders and products are available.

Personal Guarantees and Startup Finance

A lender may request a Personal Guarantee (PG) from one or more directors.

A Personal Guarantee means the individual provides personal support for the company’s borrowing and could become personally liable if the business fails to meet its obligations, subject to the guarantee’s terms.

Directors should understand the implications before signing one and seek independent legal support where appropriate.

The requirement for a PG will vary between lenders, products and transactions.

Business Plans and Financial Forecasts

For an established company, historic accounts show what has already happened.

A startup does not have that luxury.

This makes a clear business plan and realistic financial forecasts potentially more important.

A lender may want to understand:

What does the company do?

Who are its customers?

How will it generate revenue?

What are the expected margins?

What are the fixed costs?

When will the business become profitable?

How will the loan repayments be made?

Forecasts should have a clear commercial basis rather than simply showing rapidly increasing revenue without explaining where it comes from.

Confirmed Contracts Can Strengthen the Story

A startup may be new without necessarily starting from zero.

For example, a new construction company might already have:

£500,000 of confirmed projects.

The company may need £75,000 to fund materials, labour and mobilisation.

That creates a much clearer commercial story.

The funding is being used to help fulfil identified revenue-generating work.

Purchase orders, contracts, letters of intent and customer agreements can therefore be useful information where available.

How Much Should the Director Invest?

There is no single percentage that applies to every startup finance application.

However, lenders may want to see that the owners are financially committed to the project.

Imagine a new business requires:

£100,000.

The director is investing £30,000 and looking to finance the remaining £70,000.

That may be viewed differently from an application where the director wants the lender to provide the entire £100,000 without contributing any capital.

The required contribution will vary considerably depending on the transaction.

Why Preserving Startup Cash Matters

Suppose you have:

£100,000 available to launch your business.

You need:

£70,000 of machinery.

You could purchase the machinery outright and be left with £30,000.

But the business still needs:

• Stock
• Wages
• Marketing
• Insurance
• Rent
• Utilities
• Supplier payments

Using Asset Finance for eligible machinery could potentially preserve a larger proportion of that £100,000 for the costs that cannot easily be financed.

A business can own excellent machinery and still fail because it runs out of working capital.

Funding the asset and funding the business are two different considerations.

What About Businesses Already Trading for a Few Months?

The funding picture can potentially improve as a startup begins trading.

Even six months of activity can provide lenders with useful information.

This could include:

• Business bank statements
• Revenue
• Customer payments
• Existing contracts
• Management accounts
• VAT returns
• Debtor information

A business that couldn’t access a particular facility on day one may therefore have more options after establishing a trading track record.

Commercial finance should not necessarily be viewed as a one-time decision at launch.

The available lender market can change as the company develops.

Startup Finance for Buying an Existing Business

Not every startup involves building a company from scratch.

A new limited company may be created specifically to purchase an established business.

This can create a very different lending proposition.

While the purchasing company may technically be new, the business being acquired could have:

• Years of accounts
• Established revenue
• Employees
• Assets
• Customers
• Existing cash flow

Depending on the transaction, Acquisition Finance, Business Loans or secured lending could potentially form part of the funding structure.

Can Startups Get a Revolving Credit Facility?

Some startups may potentially access flexible working capital products, but many Revolving Credit Facility providers prefer businesses with an established trading history.

For a new company, lender options may therefore be more limited initially.

As the company establishes regular revenue and bank activity, additional working capital products may become available.

This is another reason the finance structure used on day one does not necessarily have to remain the same forever.

What Information Should a Startup Prepare?

Before applying for Startup Business Finance, it can help to prepare:

• Business plan
• Financial forecasts
• Director CV or industry experience
• Personal investment amount
• Business bank statements, if trading
• Personal credit information
• Asset quotations
• Supplier quotations
• Contracts or purchase orders
• Premises information
• Amount required
• Detailed use of funds
• Existing borrowing
• Company structure
• Shareholder information

A lender should be able to understand:

Who is behind the company?

What is being funded?

Why is the money needed?

How will the business generate revenue?

How will the finance be repaid?

Common Startup Finance Mistakes

There are several mistakes that can make obtaining finance more difficult.

Asking for an Arbitrary Amount

Rather than simply saying:

“We need £100,000.”

Break it down.

For example:

• £40,000 equipment
• £20,000 stock
• £15,000 premises
• £10,000 recruitment
• £10,000 marketing
• £5,000 working capital

That provides a clearer commercial rationale.

Unrealistic Forecasts

Forecasts need to be credible and explainable.

Using All Available Cash

Putting every pound into equipment or premises can leave nothing available to actually operate the company.

Applying Everywhere

Multiple applications and credit searches can complicate the funding process.

Working with a commercial finance broker can help identify potentially relevant lenders before applications are submitted.

Startup Finance Is About the Whole Proposition

For an established company, the numbers often tell much of the story.

For a startup, the lender may need to look much further.

The company might not have three years of accounts.

But perhaps the director has:

20 years of industry experience.

£50,000 of their own money invested.

Confirmed customer contracts.

A strong personal credit profile.

Realistic forecasts.

Equipment with tangible value.

That context can be important when presenting a startup finance application.

How Principal Business Finance Can Help Startups

At Principal Business Finance, we work with a wide panel of commercial lenders and can help startups and newly established companies explore suitable funding routes.

Depending on the business and requirement, we can potentially arrange:

Startup Business Loans

For working capital, stock, premises, marketing, recruitment and other eligible business expenditure.

Asset Finance

For machinery, equipment and other eligible business assets.

Vehicle Finance

For vans, commercial vehicles and suitable company vehicles.

Hire Purchase

Allowing eligible assets to be funded over an agreed term.

Finance Lease

Providing an alternative structure for eligible equipment and vehicles.

Acquisition Finance

For entrepreneurs and management teams acquiring existing businesses.

Secured Business Finance

For suitable larger requirements where acceptable security is available.

Rather than assuming that a new company will automatically be declined, we can look at the complete proposition and identify lenders with an appetite for the type of transaction being proposed.

Starting a Business? Finance May Be Available Earlier Than You Think

Launching a business requires more than a good idea.

It requires enough capital to turn that idea into a functioning company.

That might mean:

Buying the equipment.

Purchasing the stock.

Getting the vehicles on the road.

Opening the premises.

Recruiting the team.

And retaining enough working capital to survive the period before revenue builds.

Being a startup can make borrowing more challenging, but it doesn’t automatically mean commercial finance is unavailable.

The strength of the directors, business model, personal investment, assets, contracts, forecasts and overall funding requirement can all influence the options available.

At Principal Business Finance, we can help startups explore our commercial lender panel and identify potential Business Loans, Asset Finance, Vehicle Finance and other Startup Business Finance solutions.

If you’re planning a new business or have recently started trading, contact Principal Business Finance to discuss your funding requirement and explore the options that may be available. Contact us on 01604217998, email info@principalbusinessfinance.co.uk, or enquire here.

All finance is subject to application, status, lender criteria and approval. Personal guarantees may be required. Applicants should understand the obligations and total cost associated with any finance agreement before proceeding.