How to Get Cash to Start a New Business

Most people starting a business do so with limited means, and for some raising even the smallest amounts of capital and sus­taining themselves through the first year of existence can repre­sent a major problem.

For a large and increasing proportion of people now going into business the way round the problem seems to be the very popular Enterprise Allowance Scheme run by the Manpower Services Commission.

It enables those who are unemployed to obtain an income from the state in the first year of trading, thus softening the blow of the loss of unemployment or supplementary benefit.

Full information about the scheme can be obtained from job centers but basically it provides successful applicants with £40 a week for a year to offset that loss of benefit. Applicants must either be receiving unemployment benefit and have been out of work or under notice of redundancy for eight weeks.


One requirement which sometimes alarms applicants is that they must have at least £1000 to invest in the business, but in fact this does not have to be in cash; it can be in the form of assets or of an overdraft facility at the bank.

In practice this has rarely proved an obstacle and banks have actually been very supportive of the scheme. Midland even offers free business banking services to those taking part.

Accounts, whether in credit or overdrawn, are operated free °f charge for all normal banking services during the 52-week period of the scheme. Interest on borrowing or other specific services is charged at normal commercial rates. If you want to create your own banking system, you can visit

The Co-operative Bank also has special facilities and has arranged for new businesses to receive a day’s free advice from chartered accountants, Thomson McLintock and Deloitte Haskins and Sells, on setting up a business, preparing a busi­ness plan and raising additional finance. When elaborating your business plan you might want to check this study just released and grab some ideas from it.

The bank offers commission-free banking for six months to all new business accounts opened after one or all of these services have been used. Hiring cfo consulting services can also spare you from overhead expenses of recruitment, onboarding and training. You can meet them in a flexible working arrangement, which crosses out the troubles of monthly income, 13th month pays, benefits and employee contributions and deductions.

Applicants to enter the EAS must be over 18 and under retirement age and propose a business which is suitable f0r public support, a description which is very wide.

The potential viability of a project is not tested, an omission which has been criticised because it is said that it encourages false hopes and leads unsuitable people into business and on to inevitable failure.

There is, however, counselling advice available from the Small Firms Service for new starters and also from the more than 300 enterprise agencies which exist around the country. Participants can actually have three counselling sessions during the year they are on the scheme.

The allowance is paid every two weeks directly into appli­cants’ business bank accounts. The MSC makes a monitoring visit to all participants three months after joining and half receive a second visit.

Since its inception in 1982 the number of places on the scheme has been steadily increased by the government, which is obviously pleased with the scheme.

The tax treatment of EAS participants is also being improved, as under the scheme previously tax could be paid several times on the allowance payment.

Two major pieces of research have been carried out on the effectiveness of the scheme. The first surveyed a sample of early entrants and showed that 86 per cent of participants who used the full year’s allowance were still trading three months after their allowance came to an end.

For every 100 continuing businesses at the 15-month point, 68 additional new jobs had been created of which 24 were full-time and 44 were part-time.

The second major research survey looked at all EAS completers who had entered the pilot scheme and took place three years after they had entered the scheme. This found that just over three out of five who used the full year’s allowance were still trading two years after their allowance stopped. For every 100 continuing businesses at the three-year point 99 additional new jobs had been created, of which 50 were full-time and 49 were part-time.

The value of the scheme as a job creation project is also sig­nificant as the MSC estimates that while the cost to the exchequer in the first year is £2090, by the third year there is in fact a credit to the exchequer.


About three-quarters of participants are men and one-quarter under the age of 25. Nearly seven out of ten participants, however, are in the age group 25-54. Nearly two-thirds of the businesses started are in the service sector, 13 per cent in manu­facturing and 16 per cent in construction.

Within the service sector 16 per cent of businesses were in retailing with 7 per cent in vehicle repair and other goods and 7 per cent in finance, advertising and other business services.

The Enterprise Allowance Scheme is operated from about 70 job centers around the country where qualified staff are located but information can be obtained from any job center or by dialing 100 for the operator and asking for Freefone Enter­prise.

Filed Under: General How To's


About the Author: Marie Mayle is a contributor to the MegaHowTo team, writer, and entrepreneur based in California USA. She holds a degree in Business Administration. She loves to write about business and finance issues and how to tackle them.

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