Beyond Venture Capital: How UK Startups Are Using Property-Backed Finance to Scale

Equity funding dominates startup media coverage, and for good reason. The UK raised over $17 billion in venture capital in 2024, according to Beauhurst's annual funding report. But that figure masks a reality most founders know well: the vast majority of UK businesses never raise a single pound of VC money. Of the roughly 800,000 businesses started in the UK each year, fewer than 2,000 secure venture funding.

The rest bootstrap, borrow, or blend the two. And increasingly, the borrowing side has become more sophisticated, faster, and more accessible than many founders realise.

The VC Gap for Asset-Heavy Businesses

Venture capital works brilliantly for software companies with high margins, low capital expenditure, and exponential growth potential. It works less well for businesses that need physical space, stock, equipment, or property to operate.

A food manufacturing startup expanding into a second production facility. A logistics company buying warehouse space. A co-working operator acquiring a new site. These businesses may be growing at 40% year-on-year, but their cap tables and unit economics do not always match what VC investors look for.

The British Business Bank's Small Business Finance Markets report confirms this disconnect. While equity investment has grown, the majority of UK SME finance still comes from debt products, with property-backed lending making up a significant share.

For founders in asset-heavy sectors, debt finance is not a fallback. It is a strategic choice that avoids dilution and keeps equity in the hands of the people building the business.

What Property-Backed Finance Actually Looks Like

The term covers several distinct products, each suited to different stages and needs.

Bridging loans are short-term secured loans, typically lasting 1 to 18 months, used when speed matters. A startup wins an auction for commercial premises and needs to complete in 28 days. A traditional mortgage cannot move that fast. A bridging loan can, with funds often released within a week. Once the property is secured, the borrower refinances onto longer-term debt.

Commercial mortgages fund the purchase of business premises over 15 to 25 years, much like a residential mortgage but for offices, warehouses, retail units, or mixed-use buildings. For a scaling business that has been renting, buying premises can lock in costs and build an asset on the balance sheet.

Secured business loans allow founders to borrow against property they already own, whether that is the business premises or personal property. The funds can go toward hiring, stock, marketing, or any growth activity. Rates are lower than unsecured alternatives because the lender has collateral.

Invoice finance turns outstanding invoices into immediate cash. A business with £200,000 in unpaid invoices from blue-chip clients can access up to 90% of that value within 24 hours, improving cash flow without taking on traditional debt.

Asset finance covers equipment purchases, from vehicles and machinery to technology infrastructure. The asset itself serves as security, meaning the business does not need to tie up working capital or use property as collateral.

When Debt Beats Equity

The dilution calculation is one most founders understand intuitively but rarely sit down and model properly.

Take a startup valued at £2 million. The founder owns 80%. They need £300,000 to acquire premises and fit them out. Raising that through equity at their current valuation means giving away 15% of the company. If the business later exits at £10 million, that 15% is worth £1.5 million — paid out of the founder's pocket.

Borrowing the same amount against the property at 6% over 10 years costs roughly £100,000 in total interest. The founder keeps their equity intact.

This is not an argument against raising venture capital. It is an argument for matching the right type of finance to the right type of need. Growth capital for product development and market expansion may well justify equity. Funding a property purchase or equipment acquisition rarely does.

Finding the Right Lender

The commercial lending market in the UK has dozens of active providers, from high street banks to specialist lenders. Each has different criteria, sector preferences, risk appetite, and turnaround times.

This is where brokers play a significant role. ABC Finance, an FCA-authorised broker with over 20 years of experience, works across the full range of property-backed and business lending products, from bridging loans and commercial mortgages through to invoice finance and asset finance. Their panel includes specialist lenders like Together Money, United Trust Bank, and Shawbrook Bank, giving borrowers access to products and rates that are not always available when approaching lenders directly.

For startups and scaling businesses, broker access matters because the lending criteria are not always obvious. A high-street bank might decline a commercial mortgage application for a business trading under three years. A specialist lender on a broker's panel might approve the same deal with different terms. Without visibility across the market, founders risk either overpaying or being turned down unnecessarily.

The Risks to Get Right

Property-backed finance means exactly what it says. The property is the security. If the borrower defaults, the lender can enforce the charge and take the asset. For a business using its trading premises as collateral, that risk is not theoretical.

Interest on bridging loans is charged monthly, not annually. A three-month bridging loan that stretches to nine months because of planning delays or a stalled refinance becomes significantly more expensive.

Arrangement fees, legal costs, and valuation fees apply across most products. These can add 2-4% to the total cost of borrowing, and they need to be factored into the business case before committing.

The mitigation is straightforward. Have a clear exit strategy. Understand the full cost before signing. Work with a regulated broker who can pressure-test the deal. And never borrow against an asset without modelling what happens if the timeline slips.

A Broader Funding Toolkit

The UK startup ecosystem has matured significantly over the past decade. Founders today have access to grants, R&D tax credits, revenue-based finance, venture debt, crowdfunding, and angel investment alongside traditional bank lending and VC.

Property-backed finance is one part of that toolkit, not a replacement for the rest. But for businesses with real assets, real revenue, and a real need for capital without dilution, it deserves more attention than it typically gets in startup circles.

The founders who build the most resilient businesses tend to be the ones who understand all the options available to them, not just the ones that make headlines.