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4 min read | Published 16/03/2026
Being a sole trader means making your own decisions, but it also comes with financial hurdles. From Start Up Loans to overdrafts, credit cards, and even incorporating as a limited company, here’s how to fund your business.
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Being a sole trader is exciting: you call the shots, chase your own ideas, and run your business your way. However, for many entrepreneurs, it also comes with a major challenge: getting the right finance to grow or manage the business.
Whether you need cash to invest in equipment, cover short-term costs, or expand operations, there are several options available.
If your business is new or has been trading for less than three years, a government-backed Start Up Loan could be a game changer. These loans are designed to help new businesses get off the ground, without the unpredictable interest rates that come with some commercial loans.
Things to know:
Borrow anywhere between £500 and £25,000
Each business owner can apply individually, with a maximum of £100,000 per business
The interest rate is fixed at 6%
No application or set-up fees
On top of that, you’ll also get 12 months of free mentoring, which can be very useful if you’re new to running a business.
Start Up Loans can cover day-to-day costs, new stock, advertising, or equipment, but they can’t be used for paying off debt, courses, or investments outside your business. You’ll also need to meet some eligibility criteria, including being over 18, UK-based, and passing a credit check.
Having a clear business plan and cash flow forecast ready can be massively helpful. Not only will it speed up the application process, but it’ll give lenders confidence you can repay.
Maybe all you need is a little extra breathing space to cover day-to-day costs. That’s where business credit cards and overdrafts come in.
A credit card can help cover unexpected bills or short-term cash flow gaps. You’ll only pay interest on what you actually borrow, and some cards offer rewards for business spending.
Overdrafts are similar, but are linked to your bank account, giving you access to funds up to an agreed limit. Lenders will usually look for some evidence of income, a clear plan for the money, and a trading history.
If you’re looking for a larger sum to invest in your business, an unsecured loan might fit the bill. You won’t be required to put up business assets as collateral, but lenders will typically want to see proof of profitability, cash flow, and that you can comfortably handle repayments.
The advantage is that you get a lump sum upfront and a clear repayment schedule, which can make budgeting easier.
Another option is becoming a limited company. Not only can this give you extra protections, but it can also open up additional funding options. If this is something you’re thinking about, it’s worth chatting to an accountant to weigh up the pros and cons, including tax and administrative responsibilities, against the potential access to finance.
Having your finances in order can make all of these options easier to access.
A few things to focus on:
Keep clear, up-to-date accounts
Build a strong credit history, both personal and business
Have a plan for how you’ll use and repay any funds
Alex joined in 2019, bringing his expertise to a range of roles working in both the analytics and commercial teams. Then he stepped across to focus on the product team, where he’s been focusing on scaling up the teams’ SME offering.
