When starting up for the first time, many business owners underestimate how much cash they need to see them through the first few months of trading whilst they are building up sales.

Prior to trading, a business owner needs to ensure there is enough finance in place to cover the costs of starting the business and initial operational costs. If a business owner doesn’t have enough cash themselves, they will need to consider other sources of finance.

Here are some avenues to consider:

Family, friends and personal savings

Family and friends may be willing to help lend money to a new business starting up. This can be particularly good if they don’t want any interest repaid on the loan. However, if they do, there may be tax implications for both sides which a business will need to be aware of.

Credit cards

On occasions, it has been known that businesses starting up fund short-term spending through the use of credit cards. This has become more common with the availability of interest free special offers.

For short term borrowing this can be the best answer to gaining credit. For long term borrowing, it would not be the best option as interest rates tend to be higher.

Loans and overdrafts

Most UK banks nowadays offer a selection of finance options for businesses looking to start up.

Some may offer an introductory period of free banking which in some cases can last for up to two years.

It is always a good idea to start with your own bank to understand what they can offer you - what interest rate and what repayment terms, for example. Then shop around with other banks and finance institutes from that point to get the best deal for the business.

Loans are also available from government backed loan schemes and high street bank lending. A perhaps less known source for business finance is a Credit Union. With over 500 Credit Unions operating in the UK and many offering business loans at low interest rates, check if your local one offers business loans by clicking here.

Local authorities and government schemes

Some departments in local authorities may be able to offer financial support to business start-ups, including grants and loans. Some local authorities also provide managed workspace that can offer low-cost office space for new businesses. Start with exploring your local authority website.

Crowdfunding and business angels

Crowdfunding has become more widespread and popular and is a way of financing that enables others to invest a small amount of money in a business. If a business is looking for investment, it is usually matched with potential investors online via crowdfunding platforms such as www.ukcfa.org.uk. Business angels are private investors who want to look at ways of investing their money in to new start-up businesses. Typically, business angels invest funds of between £10,000 and £100,000.

Asset Finance & leasing

Being able to finance a piece of equipment or a vehicle for your business through regular monthly payments may be an alternative to funding the initial costs outright.

By Greg Thomas, director at MiVentures