Small Business Funding UK: Grants, Loans and Schemes

By Polar Small Business Manager – last reviewed October 2026

Whether you are launching, steadying a slow patch or ready to grow, finding the right funding can make the difference. The UK has more options than most owners realise, from government-backed loans and local grants to asset finance, investors and tax reliefs. It also has plenty of scams and expensive products to avoid. This guide explains the main routes, who each one suits, how to apply and what to check before you commit.

This guide is general information, not financial or legal advice. Schemes, rates and eligibility rules change often, so always confirm the details with the official provider and speak to a regulated adviser or accountant before you borrow or invest.

Your funding options at a glance

• Grants – money you do not repay, but usually competitive and tied to a specific purpose.
• Government-backed loans – such as Start Up Loans and loans offered under guarantee schemes.
• Bank loans and overdrafts – flexible, but often need a track record or security.
• Asset finance – spreads the cost of equipment or vehicles.
• Invoice finance – releases cash tied up in unpaid invoices.
• Investors and crowdfunding – equity funding involves ownership; reward-based crowdfunding works differently.
• Tax reliefs – reduce what you pay, rather than providing cash up front.
• Your own money, family and friends – simple, but personal and risky.

Start here: how much do you need, and what for?

Funding works best when it is matched to a clear purpose. Before you look at any product, answer three questions:

1. How much do you actually need? Build the figure from the ground up with our startup cost calculator or startup budget planner, and add a cushion.
2. What will it be used for? Equipment, stock, marketing, hiring and working capital each suit different types of funding.
3. How will you repay it? Check the repayments against a realistic cash flow forecast and read how much can my business afford to spend? before you commit.

If you do not yet have a plan, start with how to write a business plan or the business plan builder. Many funders will ask for a business plan or equivalent evidence, although requirements vary by product and scheme.

1. Grants

Grants can be attractive because they usually do not need repayment if the conditions are met. They can be competitive and may cover only part of a project.

What to expect:

• Grants usually fund a specific purpose, such as equipment, training, energy efficiency, innovation or opening in a particular area.
• Many require you to put in match funding of your own.
• Some only pay out after you have spent the money, and many do not allow you to claim for costs incurred before approval. Always check this before you buy anything.
• Schemes open and close at short notice, and funds can run out before the deadline.

Where to look:

• GOV.UK’s business finance support finder
• Your local council and local growth hub
• Innovate UK for innovation projects
• Devolved government support in Scotland, Wales and Northern Ireland
• Industry bodies and charities, which often run small grants for their sector

Our guide explains official search routes in small business grants in the UK: where to find funding that is actually available, and cover sector examples such as the hospitality grant scheme, whose announced deadline was 13 October 2026, and the East of England investment fund. Check official pages for current availability.

How to spot a grant scam

Grant scams are common and often look professional. Be wary if you are:

• Asked to pay a fee, a "processing charge" or a "success fee" up front
• Told a grant is guaranteed, or that you have been "pre-selected"
• Cold-called, emailed or messaged out of the blue about money you can claim
• Pressured to act quickly or to share your bank login details

Real government grants do not charge you to apply. If in doubt, find the scheme on GOV.UK yourself and contact the provider directly.

2. Government-backed loans

Start Up Loans. A government-backed scheme for new and early-stage businesses, delivered through the British Business Bank. It offers an unsecured personal loan at a fixed interest rate, together with free mentoring and support. Check the current maximum amount, rate and repayment terms before you apply.

Growth Guarantee Scheme. Lenders can offer loans, overdrafts, invoice finance and asset finance to smaller businesses with the backing of a government guarantee. The guarantee protects the lender, not you, so you are still responsible for repaying the borrowing. Read our guide to what the expanded Growth Guarantee Scheme could mean for you.

Both routes are worth considering if you struggle to get ordinary commercial finance, but always compare the total cost with other options.

3. Bank loans, overdrafts and credit

A traditional route worth comparing on total cost, security and repayment terms.

• Term loans give you a lump sum repaid over a fixed period.
• Overdrafts give you a flexible limit for short-term gaps, but the interest can be high and the facility can be withdrawn.
• Business credit cards help with day-to-day costs, but are expensive if you carry a balance.

Lenders look closely at your trading history, your forecasts, your credit record and any security you can offer. Many new businesses will be asked for a personal guarantee, which means you could be personally liable if the business cannot repay. Make sure you understand exactly what you are signing. If you have not yet opened a business account, read our business bank account guide.

4. Asset finance and invoice finance

Asset finance lets you spread the cost of equipment, machinery or vehicles over time, usually with the asset itself acting as security. It can protect your cash, but you may pay more overall than buying outright.

Invoice finance releases most of the value of unpaid invoices straight away, which can ease cash flow if customers pay slowly. It comes with fees and sometimes affects your customer relationships, so check how it works before you start.

5. Investors and crowdfunding

If you want to grow quickly, you may consider outside investment.

• Angel investors are individuals who invest their own money, often alongside advice and contacts.
• Venture capital suits businesses with high growth potential and a plan to scale fast.
• Crowdfunding raises smaller amounts from many people, either as rewards or in exchange for shares.

Equity investment means giving up part of your business and potentially some control. Reward-based crowdfunding does not normally give backers shares, but creates delivery commitments. Early-stage investors in the UK can often claim tax reliefs under schemes such as SEIS and EIS, which can make your company more attractive, but the rules are strict, so take professional advice before you rely on them.

6. Tax reliefs and support

Some help comes as lower tax bills rather than cash.

• Capital allowances let you deduct the cost of qualifying equipment from your taxable profits.
• R&D tax relief may apply if you are developing new products, processes or software.
• Time to Pay arrangements with HMRC can help if you are struggling with a tax bill, but you should contact HMRC before you fall behind.

Ask your accountant which reliefs apply to you, and keep good records so you can claim them. Our UK small business compliance guide covers the record-keeping side.

What lenders and funders usually ask for

Have these ready before you apply, and your chances improve:

• A clear, realistic business plan
• A 12-month cash flow forecast and wider financial projections
• Recent bank statements and, if you have them, accounts
• Details of existing debts and commitments
• Your personal credit position, and the business’s if it has one
• Identification and proof of address
• Evidence of how the money will be used, such as quotes

How to compare funding fairly

Two offers can look similar and cost very different amounts. Compare them on:

1. Total cost – not just the headline interest rate, but the APR, fees and any early repayment charges.
2. Repayment pattern – fixed monthly payments, flexible payments or a lump sum.
3. Security and guarantees – what you could lose if things go wrong.
4. Flexibility – whether you can borrow more, repay early or pause.
5. Speed – how quickly you will actually get the money.
6. The lender – check authorisation and permissions on the Financial Conduct Authority register where the activity requires regulation. Not all business lending is regulated, so understand what protections apply.

If an offer sounds too good to be true, or you feel pushed to decide immediately, walk away.

Which option suits your stage?

Just an idea. Use your own savings, family support or a small grant. Keep costs low and test first. Follow our step-by-step guide to starting a business in the UK.

Newly started. Consider a Start Up Loan, a small grant or a modest overdraft, and keep your finances tidy from the beginning with our small business finance guide.

Established and steady. Bank loans, asset finance and invoice finance become easier to access with a trading record.

Ready to scale. Look at growth guarantee lending, larger grants for specific projects, angel investment or venture capital.

Five common funding mistakes

1. Borrowing without a repayment plan that stands up to a quiet month.
2. Focusing on the interest rate and ignoring fees, security and guarantees.
3. Spending before a grant is approved, then finding the cost cannot be claimed.
4. Paying upfront fees to someone promising guaranteed funding.
5. Mixing personal and business debt, which puts your home and savings at risk.

Frequently asked questions

What is the easiest type of business funding to get?

There is no single easiest option. Personal savings and family support are the quickest, while asset finance and invoice finance can be more accessible than a traditional loan if you already have equipment or invoices to use as security.

Do I have to pay back a grant?

Usually not, if you meet the conditions. Some grants must be repaid if you do not spend the money as agreed or do not meet the scheme’s rules, so read the terms carefully.

Can I get funding with a poor credit history?

Sometimes. Some lenders specialise in this, and some government-backed schemes look at your plan as well as your credit record. Expect to pay more, and be extra careful about the terms.

Do I need a business plan to apply?

Often, but requirements vary. Many lenders, grant providers and investors ask for a business plan or equivalent evidence. See our guide to writing a business plan.

Is a personal guarantee always required?

Not always, but it is common for new businesses and for smaller limited companies. Read it carefully, and ask whether there are alternatives.

How do I know a funding offer is genuine?

Verify the provider independently, check FCA permissions where relevant and find grant schemes through official sources. Do not pay an unexplained fee to release a supposedly guaranteed grant.

Next steps

• Work out how much you need with the startup cost calculator.
• Build your numbers with the cash flow forecast template.
• Check current schemes in our guide to small business grants in the UK.
• Read the small business finance guide to keep your money healthy once you are funded.

More guides for the next step

Official sources

Legal and financial details checked against official guidance on 15 October 2026. Use the current guidance for your circumstances.

• GOV.UK: business setup
• Company accounts and tax deadlines
• VAT registration rules
• Self-employed registration
• ICO complaint duties
• Official finance and support finder

Keep the business connected

Explore Polar’s business tools and software, free templates and current plans.