Been there done that? -
Funding advice

Finding the cold hard cash: you can do it

Been There, Done That? is a series from award winning business journalist Rachel Bridge, exploring the most important things you may – or may not – have considered for your business. In this piece, Rachel looks at the most modern ways of securing finance for your business.

Overwhelming reluctant high-street lenders

You’ve got the idea, the plan, the enthusiasm. And the team. Now, you just need the money.


High street banks have never been great at lending to startups and, over the past few years, they’ve only got more reluctant. In general, they don’t like to lend to ventures that lack the assets needed to underpin the loan. And that probably means you.

The good news is that there are lots of other options out there, many of which cater specifically to companies without proven track records. You just need to know where to look.

The bank of friends and family

Is there a possibility you could borrow from a friend or family member, but you’re not sure how to go about it? If there’s potential here, you might want to pursue it.

The main thing is to make sure both parties are clear about how the money is being provided, and for how long. Is it a gift or a loan? If it’s a loan, when will it be paid back and at what rate of interest? Put any arrangement in writing – it’s not worth falling out about.  Seek legal advice if you need help doing that.

Virgin startup

Virgin StartUp provides government-backed Start Up Loans worth between £500 and £25,000, with a 1-5 year loan term. But it’s not all about the money – there’s more.

“The support we provide is about much more than funding”, says Andy Fishburn, Head of Investment at Virgin StartUp. “We provide one-on-one business advice to all the entrepreneurs we support to help them develop financial forecasts."


"Every entrepreneur we fund is also matched with a mentor, someone who has been there and can share their experience with the entrepreneur.”


So is this for you? Be aware that it’s a personal loan. It’s not secured on your home or any other asset. But the rate’s reasonable – currently fixed at 6% p.a. over the term. And as it’s a personal loan, more than one person can apply from a single business. So if you have four founders, partners, directors or shareholders they could each, theoretically, take a £25,000 loan.


And remember that all the monies need to be paid back, plus interest.

But the other benefits of a start-up loan include not having to give any shares away– so you won’t lose control of the business or miss out on any of the potential profits. But when you are ready to take investment you might find that being prepared to take on a loan shows the commitment and belief an investor is looking for.


But if a personal loan isn’t your thing, then consider crowdfunding.


This means you can ask lots of people to give you a little, rather than asking one person to give you a lot. Plus, every single person who backs your business is validating your idea, so it’s good for confidence and marketing-proof too.


We worked with Crowdfunder throughout #VOOM 2016 and some of our biggest success stories ran incredible crowdfunding campaigns alongside the main competition. Finalist eFOLDi set a target of £20,000 and raised over £100,000 in the end. And What A Melon ran such an exemplary campaign, they also won the Crowdfunder Award (worth a bonus £50,000). Check out their branded bus.

A quick case study

Jeff Paterson and Oliver Du Toit crowdfunded a total of £670,000 for their business Fourex  – the money exchange kiosks. Fourex was one of the winners of #VOOM 2015.


By attracting other investors off the back of their #VOOM campaign, Jeff and Oliver exceeded their target, in return for just 17% of their equity – a far better rate than you can get on Dragons Den.

Jeff says: “Raising money through crowdfunding requires a lot of preparation, but the more you put into it, the better. We spent a bit of money on getting a video professionally made, rather than just filming on our phone. We also developed a database of people who knew about us before the campaign went live. That way, we were ready to say ‘OK, we’re going live, now’s your chance’”.

Equity or rewards?

But, as Jeff’s the first to point out, there’s much more to it than a nifty video. First you have to decide whether you want to offer equity, via a site like CrowdCube that Fourex used. That means you end up with lots of shareholders and can raise millions. It also takes a lot of time and you’ll need to go through – and pass - due diligence.


A quicker option is rewards-based crowdfunding –  where you offer products, services and other benefits, on a such like Kickstarter or UK-leader Crowdfunder.  You get to keep your shares but even a successful campaign is likely to raise tens or hundreds of thousands of pounds. Rarely millions.

The good news is that there’s plenty of case studies and examples of successful campaigns you can use as a template – whichever route you go down.


Peer-to-peer lending

In a way this is a cross between Virgin StartUp and crowdfunding. Individuals from the ‘crowd’ lend you money at a rate of interest, which is their payback - instead of equity or rewards. Little parcels of loan cash are bundled together as a single loan via a platform Funding Circle.

And it’s already bigger business than you might expect.  Funding Circle has more than 50,000 lenders, 20,000 borrowing businesses and £1.5bn of loans issued. The key differences to a startup loan are that up to £1m is available. But interest rates also tend to be higher than Virgin StartUp.

Marketing the right choice for you

So, we think there’s good news here. Over the last five or so years there are several viable options to start and grow your business. All of them are worth a look. Not long ago, the picture was much bleaker.


Bear in mind that as your business grows you’re likely to need a mixture of the options. The secret is to start with funding that doesn’t set onerous payback deadlines – save those for when the business is making money. And whatever you decide, make sure you know you’ll be able to make the payments.

But with that cash in the bank (it might only take a matter of weeks) we’re sure it won’t be long before you turn that money into some serious #VOOM.

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