If you’re starting a new business, it is likely that you may need some funding from other sources.
Know your business plan
Before you start looking for investors, loans or grants it’s a good idea to make sure you have a well put together business plan. Your financial projections should be showcased in your business plan, and these need to be backed by analysis of your target market, and a cash-flow forecast. A cash flow forecast will help you to figure out how much funding you need to manage your expenses. Take care when preparing this – a lack of readily available cash could equal insolvency. A profit and loss statement will also show how your business has performed overall.
Get these figures right and well rehearsed from the start to be in with a better chance of securing investment.
A loan needn’t come from a bank, you can obtain a loan from your family, another business or by using a peer-to-peer loan company, which facilitate lending between many lots of private individuals.
A company can sell shares to investors to raise funds. Investors usually come in the form of a lone investor (angel investors) or as a firm known as a venture capitalist firm. There are several advantages to selling shares in your company. Besides raising capital, you can also share risks and get expert advice.
You can use an online crowdfunding platform to raise funds for your business. You can offer rewards or equity in return for investment. If your product or idea is popular you can raise funds relatively quickly, and using a crowdfunding platform can be a great way to market your idea.
Your business may be eligible for certain grants. Make sure you are eligible before applying using the Business finance support finder.
Banks often offer businesses overdrafts to cover times when you need to spend a bit more than you have in your business account. This is a short-term financing option. You will be charged interest on any amount you overdraw.
Invoice finance is short term option where a third party buys your unpaid invoices for a fee. This allows you get money quickly whilst you are waiting for customers to pay. There are two types – invoice discounting and factoring.
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