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RAISING MONEY FOR YOUR NEW BUSINESS

Why do you need money? Usually a new business requires money for several things;

• rent for premises if not working from home

• to fit out premises

• to buy or rent, machinery, equipment or tools

• to buy or rent transport

• to buy stock

• to pay for promotion and advertising

• to set up a web site (if needed)

• to pay occasional, part time or full time staff

The ideal new business starts small and with low costs and overhead, and builds from profits - easier said than done maybe. Some ventures can be started with just a few hundred pounds or dollars, others need thousands.

Sources of funds - start up

• own cash and savings - best to use some and not all of your own money, the return on your investment is likely to be better invested in your own business than hoarding it in banks.

• redundancy - if you are starting a business after being paid off when your job ends many are tempted to invest in a business, often without proper thought or preparation, With a big sum it is often tempting to start or buy an existing business rather than start small using a little of the available funds.

• pension funds - over 50? you may be able to release PART of a pension fund to provide business investment money, ask your financial advisor and consider long term implications as it will reduce your eventual pension.

• relatives - a touchy subject this, best to be offered money rather than ask for it, consider giving the investor a share of the business or of the profits as they are gambling on your ability. Your personal relationship may be at risk if the business fails and you loose their money.

• investors - friends who share the risk by being sleeping (not working in the business) partners in the business in return for an investment - always keep CONTROL (51%) and ideally consider up to 25% being offered to outside investors.

• partners - people who invest in, and play an active part in the business, perhaps bringing in expertise, contacts, customers, clients or other useful additions to the business. Usually done as a partnership or limited company. Maintain control (51%) to ensure long term success for you and ultimate control of the firms destiny.

• remortgage of house or secured loan - often an easy and cheap way of raising extra funds, but avoid borrowing more than you can afford to repay. Remember this is usually a LONG TERM debt and if your business fails after a year or so you could be saddled with repayments for 10-20 years afterwards.

Once established and profitable the business may need more money to fuel expansion, at this point new opportunities arise as sources of funding.

• franchising - here you sell area rights to market your business model in return for a "royalty" on sales and a sum for the area rights, which can extend worldwide. Expensive to set up and needs a proven track record of success to sell to franchisees.

• business loan - a bank lends money based on the success and performance of your business, sometimes requiring personal guarantees from the business owner(s) and perhaps a charge on personal assets, usually their home. Loans can be OVERDRAFT (short term) or medium term usually 5 years maximum.

• grants - sometimes grants and awards are possible based on the area or type of activity. Some times this carries a low interest charge, and is done as a loan rather than direct non repayable grant, check with local banks and enterprise or business agencies about availability.

• factoring - a way of raising money against your sale invoices raised to business customers. The amount you can raise by advances depends on the number and quality of your customers and their average spend per annum. Useful source of cash flow for rapidly expanding firms.

Useful web sites

• Small Business Research Funding Opportunities (SBIR and STTR) Links to Small Business Research Funding Opportunities and SBIR / STTR Applications.
   

• Search over 4000 Business Loan and Capital Sources business loans, small business loans, government loans, hard money lenders, commercial mortgages.

• Small Business Finance - Small Business Funding Small business finance - Raise money for you business. Tips and advices on how to get small business funding.

• The Truth About Small Business Grants If you do find a small business grant program available for your business, be ready to go through a lengthy, approval process.

• Small Business Funding 4smallbusiness.com  Specializing in helping businesses looking for business financial services, working capital, equipment leasing, small business loans, commercial loans and.

• Factoring Accounts Receivables Cash Flow Small Business Funding factoring cash flow factor receivables small business funding loans

Please feel free to Contact Us with questions or to give us information to add to our knowledge base.