Setting up your business is costly, and if you want to make your dream a reality, you need to think about how you are going to get the money to do it. You need to earn while you are getting your business off the ground, so you have to be realistic about how what kind of fund you want, and can afford to get.

Once your business plan is complete, you can look at a variety of options.

Secured and unsecured loans

Remortgaging your home is one way to raise finance, but even though it is a cheap way to raise cash, it is risky. If you fail to make enough money to get the business off the ground, you could lose your home.

You can get an unsecured business loan through most high street banks, but they are usually capped at £25,000, and extend up to 10 years, on either fixed or variable interest terms.

Some flexible business loans offer perks such as a repayment or interest-free period or a payment holiday each January. Business loans are offered by a wide variety of lenders.

If you have tried and failed to get a small loan for your business due to lack of security, it is worth contacting the Small Firms Loan Guarantee Scheme (SFLGS) that may act as a guarantor for finance up to £250,000.

Family loans

Getting a loan from your family, whether you are paying interest or not, is a privilege, but if you end up falling out with relatives over money, you can lose a lot more than your business. So take it seriously, and view any repayments as if you are dealing with the bank.

Overdrafts

Business accounts usually come with an overdraft, but how much this is for depends on your business, credit status and level of free cash flow that will repay the overdraft as it is being used. But £5,000 from a high street bank is typical.

Overdrafts represent the most negotiable of lending options and so the interest rate you pay will vary enormously on a case-by-case basis. However, you will probably have to pay an arrangement fee up front and an annual fee. If you go over the agreed limit there is usually a flat charge of £20. Often, this is then multiplied for each £100 you have exceeded your limit by. Interest on excessive borrowing can reach over 29 per cent APR - and this is not negotiable.