To set up a business you are going to need money. How much money you need will depend on a number of factors [refer to: How much money do I need?].

There are three ways of raising money: i) use your own, ii) someone else's or iii) a combination of both. The obvious advantages of using your own money is that you don't owe anything and it could make people think you really believe in what you're doing. The downside is that you could risk losing your money and end up with nothing to show for it.

If you need to obtain money from another source and you know how much money you require, you need to think about how much to ask for, as the two figures will not necessarily be the same. It is best to ask for more than you require with the expectation that you are going to receive less than what you specified. Bear in mind that your request needs to tally with the figures in your business plan [refer to: How to write a business plan].

Don't be put off for requesting a large sum of money (for example in excess of £250,000), if your business needs it [refer to: Raising large sums of money].

Ways of raising the money
There are a number of ways of raising finance for business start-ups, which includes the following:

Family and friends - They may be willing to lend you the money or give it to you as a gift. The advantage is that you may not have to pay interest and they may be more flexible about you paying the money back. The disadvantage is that if you can't pay the money back it could destroy your relationship.

Bank loans - For most small businesses the most obvious place to raise money is through the bank. Don't expect that on your first visit to a bank you will be given the money, prepare yourself if the answer is no, if that is the case shop around. Loans can vary from bank to bank.

Bank overdafts - If you need money for the short term, an overdraft may be suitable. This is a quick to arrange and fairly cheap.

Grants & Cheap Loans - In some assisted areas, you may qualify for a grant if your business fulfils certain criteria. For example, the East Midland Government Office and West Midlands Government Office can help companies in the Midlands. The Princes Youth Business Trust can help young people between 18 - 30 with funding [refer to: Where to get help and advice].

Small Firms Training Loans - This is a deferred repayment loan to help small businesses pay for training.