How to get business finance without a proven track record

Getting a business off the ground can be hard enough. Harder still when you don't have past performance or proof of concept to point to when you're looking for funding.

And when it comes to most debt finance, lenders usually want to see a track record as part of their credit assessment criteria.

In this article, we look at which types of finance place less emphasis on your business' trading history.

(Note: This isn't a comprehensive list, and there may be other forms of finance available which are more appropriate to your business.)

Look for an Angel

Your track record may be important to some funders or investors, but potential may also be significant. That's why an Angel Investor could be an option.

Angels invest their own money into a business in exchange for a minority stake.

They tend to be entrepreneurs themselves so should be able to spot opportunities for you. They take pride in helping your business become a validated, profitable entity.

Working with an Angel Investor will usually mean giving up some control in your company. But being able to benefit from their skills, contacts and industry knowledge can take your business to the next level.

There are a few different ways to find an Angel, from attending networking events to searching member directories. Use our checklist to see if you're ready for Angel Investment.

Angels invest £1.5 billion in UK businesses every year.

Engage your customers

Maybe you don't have an obvious track record but you do have a great product.

Maybe you're even starting to build a loyal customer base. Or you have a business plan that people say they believe in.

While it might not be enough to get investment or loans the traditional way, it could capture the attention of the general public.

Equity Crowdfunding can help you raise money from lots of investors via a regulated online platform.

You could get capital from existing investors and be able to put your business or product in front of a new or interested market.

However, it can be a time-consuming process - and success is far from guaranteed.

You often need a clear business plan to showcase your growth strategy and to target the right platform for your business.

Each crowdfunding platform offers different benefits depending on the age and type of the business, so carry out your due diligence.

But before you do, find out if Equity Crowdfunding is for you, and do your research to make sure your business is ready.

Crowdfunding has given us more than 2,000 supporters and early customers… Securing finance has allowed me to fund an idea I had as a teenager into a business that’s about to transform an industry. Yasser Khattak Founder and Chairman, Den Automation

Get a government-backed loan

Most debt funding will require you to meet a number of strict conditions. But there are still some options that don't involve demonstrating a track record or providing assets as security.

A Start Up Loan is a government-backed personal loan (as opposed to a business loan) of £500 to £25,000. You can use it to:

  • start a new business
  • grow an existing business that's no more than three years old

The loan is unsecured so you don't have to use your house or any other asset as security. You make repayments over one to five years at a fixed interest rate of 6% per annum.

Start Up Loans support most types of business and recipients are also entitled to 12 months of free mentoring. You can find out more at the Start Up Loans Company website.

When you might have to prove yourself

If you apply for an Overdraft, you may have to prove you're a reliable borrower.

You'll need a good credit history, both personally and as a business. You might also be asked to provide an asset such as property as security.

Lenders may even require you to have been their customer for a significant period of time, and have filed a certain number of accounts.

Many types of equity finance focus on established businesses too.

Private Equity, Venture Capital and Expansion Capital firms all typically consider businesses with defined proof points and an engaging story to tell - which may be tricky if you're just starting out.

Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

Making business finance work for you

Our Making business finance work for you guide is designed to help you make an informed choice about accessing the right type of finance for you and your business.

Read the guide to making business finance work for you

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