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Last updated on 2/6/20

Discover sources of funding

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How much money is enough to start up? It’s a question you’ll need to answer before you begin work as a freelancer. So, in this chapter, we’ll look at the options available to help you finance your self-employment.

Identify your start-up costs

Whatever your area of work, you’ll need money right from day one. Exactly how much depends on the type of freelance work you’ll be doing. You’ll need to:

  1. Add up your living costs

  2. Determine your business costs

  3. Research most competitive prices

Add up your living costs

These are your everyday living costs. Everything you currently have to fork out for each month. These could include:

  • Rent/mortgage

  • Utility bills

  • Food

  • Clothing

  • Transport (ie car payments,
    public transport, petrol)

  • Insurance (life, contents, car)

  • Phone/broadband/TV

  • Car

  • Petrol

  • Clothing

  • Leisure

List everything that applies to you and how much you pay for each. Then decide if there are any you can do without, or pay less for. You’ll end up with a figure that represents the minimum amount you’ll need to earn each month.

Determine your business costs

Office equipment, supplies, tools

Will you need a computer, printer, desk or office chair? For non-office based work, what tools are necessary for you to work effectively? To keep costs down consider buying through classified ads websites such as Gumtree where you can find free and competitively priced goods locally.

You’ll also need to organise business stationery. If you’re comfortable around computers and design, there are sites online, such as Canva, where you can design your own letterhead. You may also consider hiring a professional designer.


Will you rent an office, shared working space, studio or workshop? Depending on your area of work you may decide to work from home. As attractive as that may sound, it will also mean paying more for your gas, electricity and water. Figuring out exactly how much will be difficult before you start, but if you can estimate the number of hours you’ll work from home, you can use the government’s simplified flat-rate formula below to give you a rough estimate of how much extra per month you should allow for:

Utility bill flat-rate

Hours of business per month

Flat rate per month





101 and more


Training and development

Will you need any additional training or professional certification before you start? It might mean gaining a qualification, enrolling on a skills-based course or obtaining a first aid or health and safety certificate.


Think about the type of marketing you’ll need. Will you need to create fliers? Will you market online? Take out paid advertisements? You’ll just need a rough estimate at this stage. We’ll look at the type of marketing/advertising available to you in more depth in part three.


Setting up a website involves various costs. You’ll have to buy a domain name and pay a company to host your website. Nowadays, with the development of user-friendly content management systems such as WordpressWix or SquareSpace, it’s becoming easier and easier to design your own website. But, again, if you lack confidence in this area, consider hiring a web designer to do this for you.

Business insurance

You identified the insurance cover you’ll need in the last chapter. Get two to three quotes for each and always compare policies. The cheapest might include an excess payment if you need to make a claim so may not always be the best option.

Company set-up fees

This will only apply if you have decided to trade as a limited company. It’s straightforward enough to do and costs £25. There are no set-up fees for sole traders or partnerships.


Will you import raw materials for your business? You’ll need to account not just for the cost of these materials but also the cost of having them delivered to you.

Decide how to fund yourself

Use your own money

This is the best way to fund your freelance business. Even if you ’re contemplating freelancing, start saving. Using your own money means you’ll keep control over your business, won’t owe anyone anything or be forced to pay interest.

How much should I save? 

As much as possible. But as a basic guide, you should save enough to satisfy all your start-up expenses and have at least 3-6 months worth of living costs to cover the early months when you might not have as much work.

Start-up grants

A grant is a sum of money given to a new company for a specific purpose. It means you’ll have to meet certain criteria in order to get the cash.

The grant pot isn’t bottomless though, so even if you meet the criteria, you’ll be up against many other businesses, so you may not be successful.

Some grants are state-funded (ie government money), others come from charitable foundations or large corporate companies.

Applying takes a lot of time and effort. You’ll need to justify why you should receive the cash, show a business plan and explain how you will use the cash.

There are some areas of industry in which the government is keen to encourage development. If your business falls within one of these, there may be more grants available. These include the environment, energy or innovation.

Grants are a good source of finance because you don’t have to pay the money back, but you will have to use the money for the activities you were awarded it for.

Check gov.uk for a list of local, regional and national grant funders.


Thanks to the development of the internet, crowdfunding has entered the fray as a new way to raise money for your business. It’s where you encourage lots of people to invest small amounts in your business. Watch the Crowdfunders.com video below for a quick 3-minute explanation of the four different types.

This form of finance doesn’t work for everyone, but it has proven successful, particularly for innovative new tech gadgets or quirky home inventions and even for self-published books.

Bank loans

This is last on the list for a reason. If you’re lucky enough to be accepted (lots of banks see the self-employed as too high risk), you’ll be tied into monthly payments, which could prove difficult if you’re cash flow stalls one month. You’ll also have to pay interest on top of what you owe.

Remember, if you’re a sole trader or partnership and your business fails you’ll be personally liable for repaying the debt. Taking out a bank loan should be a last resort.

We’ve explored how to finance your business right now as you start out, but too few freelancers think about their future financial situation. In the next chapter, we’ll look at pensions and how to put a plan in place for your retirement.

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Example of certificate of achievement
Example of certificate of achievement