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Raise Finance

All new businesses require finance when starting up. Normally, there are start-up costs which have to be incurred before the business can commence trading and invariably there is a lag between setting up the business and the business reaching the point where it starts to make a positive cash flow. The start-up costs can include business equipment, premises, marketing costs, professional fees and some other general expenditure. In addition, you will need to provide finance for working capital to allow you to pay ongoing costs and keep the business going until the business starts making a profit, or more importantly generates a positive cashflow!!

There is a range of finance options for new businesses. The most common ones are - you can use your own savings, borrow from family and friends, borrow from banks or attract outside investors. Grants and government support may also be available. Most new businesses use personal savings as the prime source of finance. If you can convince family and friends to invest you may get some financial backing there. However, you need to consider the risk if the business fails. Your family and friends could end up losing their money. If you have a credible business plan the banks may be willing to provide finance for your business. This could take the form of an overdraft facility, a loan or even a credit card for the business.

Most businesses would use a combination of the above, depending on the specific needs and circumstances of the business.

It may be worth investigating the potential for your business to receive either a grant or loan. This is normally dependant on the location of your business, i.e. certain deprived areas may qualify or there may be grants available for specific types of business. The grants or funding may require match funding, i.e. they will only cover a percentage of the total funds required. They cannot normally be applied for retrospectively and sometimes the process can be administratively daunting and time consuming.

A well constructed business plan should identify how much finance the business requires. Most business failures result not necessarily from a bad business idea but because the business runs out of cash. Even a successful growing business can run out of cash and a business plan should help to identify how much cash the business requires month by month.

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