It all starts with a great idea, an idea that has probably been on your mind for a long time. You have products sorted, how are you going to deliver your service, where are you going to set up your office and how will you market your new business. But the offense always takes finance to get you that. Finding finance to get a small business off the ground is a major issue for any potential small business. Some new businesses lend themselves to very little start-up capital because the main selling point is the skills and knowledge of the owner, for example consultant, web designer, PR specialist. Businesses that require stock holdings, plant and equipment, and other investments face the real challenge of getting their start up finance together. So which sources can you tap to ensure your business gets off to a solid start? Your first port of call saving! If you have been in employment for some time, before going alone you should expect to have some extra cash behind you. Whether it is in the form of cash in a savings account or for shares and unit trusts, this is a good start for your fund raising exercise. If you have a goal of setting up your own business for a while, you can focus more on saving cash.
To get your business off the ground you need to save, knowing that you will not spend your future nest egg on unnecessary items. While a new plasma TV or latest DVD recorder may seem an essential purchase, knowing that you have a business to set up in the future will be a sufficient deterrent to keep the check book firmly closed! Keep Your Job Some business owners are fortunate enough that during the early days of the business they can hire in the evening and work on the business during the evenings and weekends. This has two advantages. First of all, they are still earning thereby allowing more time to create cash reserves. Secondly, there is an opportunity to ensure that the business is tested to test the market. Make sure that you can actually keep both balls in the air at the same time otherwise you will do justice to neither your job or any new business. If you want to follow this strategy then the support of your family is also necessary. They have to accept what used to happen in the family's time. You may have to take a back seat until you decide to focus on the business full time. Family and friends can be a useful source of finance for any start up. If you have persecuted ambitions to run your business for some time, many of your family and friends will already know about your idea. Therefore you should have a clue as to who is for it and who is against it. If you haven't shared your secret desire, it's time to get a little distracted! If you are in the initial planning stages, start feeding your ideas to the key people you feel you are likely to support. Tell them your thoughts, share your ambitions and goals and update them with your progress on a regular basis.
The plan is to sell them and your future business at an early stage. Once you get to the point where you are ready to start asking for contributions, keep Investor Evening. Outline your plans, business, market etc. Make a presentation. Show potential investors what it will be in their recognition to support you. Promise an interesting and fun evening to as many people as you can invite, be bold at the very beginning; Tell them why they are there, so there is no misunderstanding. When you have done your presentation, the names of all the people who want more information or can do one-to-one with you. While this group is people who know you and are therefore more likely to trust you, do not forget that you are developing a very different relationship that can quickly turn sour. Be prepared for rocky times! Bank Line of Credit or Credit Now you are getting involved in serious things! It is difficult to get support from a bank for a new business, as many entrepreneurs will testify. A sneaky way is to apply for an unsecured loan while you are still in employment. If you have planned the right things, then you will know when you are starting, so when you pack your job a few months in advance, apply for a loan based on your salary. However, make sure that you can meet the payment comfortably. There is no grace period; You will be expected to pay immediately, so your business will have to start earning very quickly. The option is a business line of credit facility. There is no fixed repayment date.
However they will be for a period of 6 to 12 months, and you just have to make sure that you keep within the overdraft limit. You will need to write a business plan to present to the bank that outlines your idea and business. Mortgage or equity release The way home prices have been rising over the years, most people now have sufficient equity in their homes. A cheaper option for a bank overdraft or loan is a mortgage. The interest rate is low and, since the repayment extends over a longer period, the monthly repayment is lower (although you will pay more interest in the long run). The disadvantage of raising cash in this way is that there is a potential risk to your home. If meeting the monthly repayments depends on what the business can generate then a slow start can lead to cash problems. So make sure that you can complete the repayment even during leanness. Credit Cards If you have no savings, you cannot get support from family or friends, or bank loans or mortgages, then you have credit cards! However, it is easy to pull down on your card, but be careful! Credit card is the most expensive form of debt. They are ideal because all you have to do is pay the minimum amount but card debt, as most people have found, can be a long-term burden. But, if you need a cash lump sum to start a business and you know that you can pay it off within a few months, it is somewhat unconventional, an alternative source of finance worth considering! Business Grants Business grants are available for specific industries, sectors and causes.
Grant providers usually only provide a portion of your requirement, so they cannot be used to begin completely. However, they can be useful in filling the funding gap. Business Angels are a popular way to fund business. These are people who are usually retired or successful businessmen on their own, who are looking for opportunities to invest in new businesses. In return for an investment they would typically look for a stake in the business and some hands-on participation. They will have a vast business experience and therefore have to keep useful people on board. However, you have to accept an element of loss of control but for this you have to be balanced against the desire for money. Getting finance for your new business can be a challenge, but it requires a lot of avenues to explore and focus on so that you can start your own small business soon.
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