Finance for start-ups


Money is necessary for starting your business and to keep it going until your customers pay you. You will need to cover your personal expenses until the business can support you.

There are many different routes to financing your startup including:

Personal savings A common method of providing seed capital for new businesses is investing your personal savings in order to get the company off the ground. You may have some personal assets that you could sell, or use a salary from an existing job whilst working on your business part time to begin with.
Friends & family Can provide loans and support in the early stages when accessing funding can be difficult. This can be a really effective way to gather seed capital, but there is a risk to future relationships if things don´t work out the way you plan with your business. Make sure that you have a conversation where you clearly explain the risks and and come to an agreement on the loan repayment structure.
Banks There are various loan options for startups. The two main categories of loans are secured and unsecured loans. It may also be possible to use an existing overdraft facility on your current account as seed capital.
Secured loans – use company or personal assets such as a property or car as security based on the amount borrowed. This can then be repossessed by the bank if you default on loan repayments.
Unsecured loans – do not require a form of security and are issued based upon your creditworthiness. These are riskier for lenders, so usually come with higher interest rates. Credit cards and personal loans are examples of unsecured loans.
Factoring or Invoice financing – can be a good option if you have started trading and have outstanding invoices. Banks may loan up to 85-90% of the value of outstanding invoices which can then be paid back once you have received the payments.
Business cash advances – involve businesses receiving advanced payments based on expected future revenue. It is repaid at an agreed percentage of further card purchases being paid back to the lender.
Arion BankÍslandsbanki and Landsbankinn all offer companies a wide range of services and various financing options.
Svanni  is a women’s loan guarantee fund that provides credit insurance to women-owned companies and is in collaboration with Landsbankinn on loan repayment. Only companies that are majority owned by a woman can apply for these loans and credit insurance.
Venture capital You can pitch your business to Venture Capital firms to gain financial support in exchange for equity (shareholding) in your company. This brings the benefits of potentially gaining investors who can provide advice and expertise for your business.
Some Icelandic venture capital providers:
New business venture fund – is a state owned investment fund intended to strengthen and develop the Icelandic venture capital market along with promoting startups and business in Iceland thus encouraging economic growth
Eyrir invest – is an international investment company that focuses on investments in industrial companies that have the potential to become true global leaders
Frumtak ventures – invests in early stage innovative companies that are post seed and show great potential for growth. Their emphasis is on investing in companies where growth and sales in foreign markets are the primary objective. They do not specialize in any particular industry
Brunnur ventures – invests in Icelandic startup companies with an emphasis on innovation and growth with scalable business models and extraordinary entrepreneurial talent. The fund also has an emphasis on companies within software, internet, high-tech, biotech, energy technology, marine technology and food manufacturing that has a competitive edge with patentable technology or proprietary know-how
Thule investment – Invest in companies that have developed a product or service that is ready for marketing and has the potential to leverage resources to grow rapidly
Virðing – operation of domestic and foreign mutual funds, investment funds and professional investment funds
Angel Investors Angel investors, often known as high-net worth individuals, want to invest their personal money and make their own decisions about investment opportunities. They can often provide less finance than a venture capital firm, but have the potential to back riskier prospects. Angels can also bring valuable ideas and advice to your business. When looking for this type of financing, angel investment networks and syndicates are a good place to start.
Corporate Investments Similar to Angel Investors, large corporations can choose to invest in other businesses. They can often invest more than individual angels due to the higher worth of companies compared to individuals.
Crowdfunding There are various forms of crowdfunding with the most relevant for funding small to medium-sized enterprises (SMEs) including, peer-to-peer lending, peer-to-business lending, reward-based and equity crowdfunding.
Peer-to-peer – lending involves investors lending money to an individual for a fixed interest rate.
Reward-based – crowdfunding allows you to receive funds in exchange for giving your investors a reward, such as a product sample or event.
Equity crowdfunding – is similar to rewards-based but instead of providing capital for rewards, you offer shares (equity) in your company in exchange for investment. Equity crowdfunding enables everyday investors to invest alongside professionals and venture capital firms, with hope for a greater return.
Some crowdfunding providers:
Karolina Fund
Patreon – for artists
Grants Grants are usually publicly-funded schemes which offer cash awards, free equipment and tools or reduced costs for using vital resources to entrepreneurs and small business owners. Depending on the grant scheme, you often won’t have to pay interest, give away equity, or even pay it back at all. Grants are usually awarded by organisations to address a specific issue or have a positive impact on peoples lives, a specific industry, the economy or job creation, and the grant money awarded must usually be used as detailed in your grant application. It is also quite common for the grant money to be released in stages upon successful completion and review of project milestones
Direct grants – are usually a cash award given to a business to carry out a specific project. Some direct grant schemes will require you to match the grant amount in money you raise by yourself – so, effectively, you’ll usually put up 50% of the cost of the project. There will also likely be regulations involved and agreements to be set in terms of how you can spend the grant money.
Resource and training grants – can help startups and SME´s to access resources, skill sets, expertise or access to the facilities and equipment they need to complete their project
Tax relief – government run schemes such as corporation tax relief incentives to help reduce outgoings when establishing your business
Rannís – The Icelandic Centre for Research administers the main public competitive funds in the fields of research, innovation, education and culture in Iceland. RANNIS cooperates closely with the Icelandic Science and Technology Policy Council and provides professional assistance in the preparation and implementation of the national science and technology policy.
RANNIS administers competitive funds in the fields of research, innovation, education and culture, as well as strategic research programmes.
RANNIS coordinates and promotes Icelandic participation in European programmes such as Horizon 2020,  Erasmus+ and Creative Europe


Creative thinking and planning your cashflow can save you money and make it less costly than you may think to start your own business. It is highly recommended that you research into your specific business activity sector when looking to raise finances. There are often industry specific grants, funding or investment opportunities dependent upon the product or service you are creating, the business activity area you will be operating in or the business lifecycle stage that you are at.

There are advantages and disadvantages to all of these methods of raising the capital needed to start your business. Personal circumstances and the nature and scale of the business startup lead people to use different combinations of these financing options. For example, if you are unemployed, don´t have a strong credit rating, have none of your own money to invest in the business or any assets to secure a loan against, it is less likely that a bank will loan you money. In these circumstances, the person starting their business will likely use a combination of personal finances and loans from family and friends to get their business started. Banks want to feel confident that you will be able to repay them the money that they loan to you, and Investors want to feel confident that they will see a return on their investment.

A bank is likely to rate your application on at least three factors:

  • Management – your talents as an operator, including your talents to manage.
  • How viable your business idea is – the market for your idea or service, the cost of your business and your budgets.
  • Risks – the risk the bank takes in not getting their money back. Keep in mind that if successful, the bank will not share the proceeds with you, but may lose if things go wrong. In the minds of bankers, any new business is risky. Because of this, the bank wants to secure itself as best as possible before loaning money.

Credibility – sometimes people are trying to start their new business in a field in which they have no experience. This doesn´t mean that you will not be able to make a success of your business. It does mean that you won´t have the same initial credibility as someone else who has worked in the field for many years and is trying to start their own business in that field. Starting small, profitable and heavily investing your profits back into your business for the first 12 months before looking for a loan or investment can be a very effective way for you to start your business, learn about your industry and how to run your company successfully without having the pressure to start paying off a loan or answering to an investor straight away. It also allows you to figure out exactly why you need a loan and where best to invest that money to help your business grow. It will be a very different conversation that you have with investors or banks when you can show your trading accounts for the past 12 months (especially if your business is profitable or breaking even), explain exactly why you want the loan or investment, and show clearly how that money will help your business to grow. You now look like a credible person with a credible business worth investing into. If you can present a very credible business plan, with a realistic financial forecast and convey that you are a credible person to execute the business plan, then you have a much stronger chance of attaining a loan, finance or funding.

Financial statements

There is often a lot of confusion around the different types of financial statements that exist and why they are used. The main financial statements to be aware of when starting your business have been described in brief below and you can download an excel spreadsheet to use for bookkeeping and generating financial statements here:

Personal survival budget – is a document that you create based on your average monthly income (salary, benefit payments etc) minus all the costs and expenses you would incur in a typical month (rent, utility bills, grocery bills, entertainment etc). This is your personal budget and not related to the business that you intend to start. You create this document to help you understand how much money you will need to make from the business in order to be able to support yourself in the early days. It can also help you to figure out where you could possibly make lifestyle changes in order to start saving money to help you fund your business startup.

Cash flow forecast – is a document that you create based on best estimates of your expected income (any money paid into the business) and expenses (any money you spend on your business) over a fixed period of time into the future. Cash flow forecasts typically cover a 12 month period, but can be forecast for any duration of time ie. a week, a month or 5 years. There are many reasons why you will use a cash flow forecast dependent upon whether you are pre-startup or already running your business.

Pre-startup Helps you to understand your expenses and how many sales you will need to make in order to break even against your known business expenses
Banks or investors will want to examine this before making a loan or investing
Post-startup Helps with planning how much cash you will need at different times in the future
Shows whether your business is meeting expectations by comparing actual figures with estimates
Helps with budgeting for equipment purchases or employing new staff members
Allows you to simulate best and worst case scenarios and plan accordingly for them
Identify if you need to take out a loan to cover a quiet business period


Balance sheet – reveals the financial status of a company at a specific point in time. The statement shows what the company owns (assets), how much it owes (liabilities) and the amount invested in the business (equity).

Assets Something a business owns or controls (e.g. cash, inventory, plant and machinery, money owed for products or services etc)
Liabilities Something a business owes to someone (e.g. creditors, bank loans, bills to pay etc)
Equity What the business owes to its owners. This represents the amount of capital that remains in the business after its assets are used to pay off its outstanding liabilities. Equity therefore represents the difference between the assets and liabilities.


Profit and Loss Statement (P&L) – reports the company´s financial performance in terms of net profit or loss over a specified period and includes information on income and expenses. Net profit or loss is calculated by deducting expenses from income.

Income What the business has earned over a period (e.g. sales revenue, dividend income, etc)
Expense The cost incurred by the business over a period (e.g. salaries and wages, depreciation, rental charges, etc)