How to Finance Your Business During Covid-19: 7 Ways to Consider



Every business owner needs money to get their startup off the ground. You can’t very well open a shop or restaurant without premises and equipment, and even the most capital light of companies need to pay staff and cover IT costs. Financing your business allows you to start off on the right foot, but you need to be smart about it. It’s important to weigh up your options and make the right choice for your company. Here are the best financing options to consider for your business.

1. Government Grants

The UK Government offered a number of different grants such as the Self-Employed Income Support Grants (SEISS) to Self-Employed individuals and the Business Rates Grants to businesses with commercial premises to help get through the pandemic.
These are great as they don’t need paying back but should be included in the year end accounts or self assessment tax return.

2. Government Backed Loans

The Bounce Back Loans (BBL), Coronavirus Large Business Interruption Loan Scheme (CLBILS) and Coronavirus Business Interruption Loan Scheme (CBILS) have now closed to new applications. However, there is now the Recovery Loan Scheme (RLS) which launched on 6 April 2021. This supports access to finance for UK businesses as they recover and grow following the Covid-19 pandemic.
The aim of RLS is to help businesses affected by Covid-19 and can be used for business purposes, including managing cash flow, investment and growth. It is designed to support businesses that can afford to take out additional finance for these purposes.

3. Business Loans

Business loans are a very popular finance option for startups. Most often, this takes the form of an installment loan whereby the lender pays out a lump sum and the business owner makes regular repayments. It’s worth doing your research or even hiring an accountant to find the best rates possible. In addition to a bank, it’s also thinking about applying to credit unions, nonprofits and microlenders for a business loan.

4. Business Credit Cards

There are several advantages to using a business credit card. Even if you’re a sole trader, it’s advisable to separate your personal and business accounts as soon as possible for transparency purposes. Moreover, a business credit card provides a clear picture of your spending habits, highlighting areas where you may be able to cut costs.

On top of this, business credit cards can really help with cash flow. The interest-free period allows you to delay payments for a limited amount of time at no extra cost to you; the exact length of time varies by provider.

Many credit cards also come with attractive rewards and benefits, such as cashback and air miles which can save you money later on.

A business credit card is certainly an appealing option so long as you carefully manage it. Late payments can result in a hefty amount of debt. If you want to borrow a significant amount of money in the long-term, a bank loan will likely serve you better. That being said, a credit card can be very helpful in terms of convenience and cash flow.

5. Lines of Credit

If you’re looking for something between a credit card and a business loan, it’s worth considering a line of credit. A line of credit is a preset borrowing limit that you can use at any time, like a credit card, but you pay it off in installments, similar to a loan. Lines of credit tend to have lower rates than credit cards, but there’s no interest-free period so it may not prove as beneficial for short-term cash flow problems. However, this option is a great financial safety net for your business and can prove very valuable in emergencies.

6. Equipment Financing

You’ll need the right equipment to run your business, but buying it all outright can create serious cash flow problems. Remember that the expenses don’t end with purchasing equipment; you’ll also have to maintain, upgrade and repair it regularly to keep things running smoothly. Therefore, if you require a lot of equipment it’s worth looking into equipment financing. There are two main options available to you:


  • Loans: An equipment loan helps you to buy equipment, since you’ll own it in full once the loan is paid off. This is lower-risk than a bank loan but functions in much the same way.


  • Equipment lease: This type of arrangement allows you to rent equipment for an agreed-upon period. There may be an option to purchase the equipment at the end of the lease if you wish, or you can choose to upgrade. This is a particularly advantageous option for when you need equipment for a short amount of time or find yourself constantly having to fork out for upgrades.


7. Crowdfunding

Last but not least, the past decade has seen an explosion in the popularity of crowdfunding. The most obvious advantage of crowdfunding is that the money doesn’t have to be repaid, but this means you’ll need to put forward a very convincing case in order to secure donations. Crowdfunding requires a lot of time and effort, which could otherwise be dedicated to your business, so a business loan may actually be more cost-effective overall.


From My Business to your Business

It’s worth carefully weighing up your options to consider which method of financing best suits your business. Financing might seem daunting, but the right option will put your business in a strong position and help to pave a smooth path towards future success.


You're very welcome to get in touch with Grace Certified Accountants if you have any questions.

I hope this information helps your business run more smoothly through these difficult times.


Stay safe


 Dora Ngoma

Director & Managing Partner

Grace Certified Accountants


Please check out my other blogs for more advice on how to run your bookkeeping and accounts smoothly. Or take a look at us on Facebook and LinkedIn for more valuable insights.