When it comes to gaining funding for your business there are a number of different places and avenues that you can approach but the one that you actually choose to use will be based on your business needs. Some examples of the places that you can turn to in the hope of gaining the business finance that you need are bank loans, family/friends, credit cards, overdrafts and investors. These are only a handful of the finance options that are open to both start-up businesses and established businesses; however in some cases many businesses often choose to use a combination of many different sources of finance in order to cover all of the expenses.
It can easily be said that many new businesses will exhaust the internal financial resources which are needed and used to get your business off the ground during the initial start-up phase. It is because of this that new businesses will then seek additional capital in order for them to continue to grow. The statement it takes money to make money is also never more relevant than it is when it comes to small businesses. This is due to the fact that every small business needs money to get started, operate and expand as well as to grow.
If you are a start-up business and you are at the point where you require outside finance you must clearly identify the purpose of your business finance. The start-up finance that you gain for your business is generally acquired so that you can gain assets for your business. These assets are used to help your business achieve its profit making objectives.
When you start to look for ways of raising business finance you should have calculated roughly how much money you are going to need in order to cover all of your business start-up expenses. By doing this you have a better chance of getting the business finance that you want and that you require. Once you have gained a rough estimate of how much money you are going to need for your business start-up in order to get your business off the ground you can start to think about the various avenues that you are able to approach as a way of securing your business finance.
However when it comes to business finance there are only really two words that you need to consider, these are debt or equity. Debt finance, for example, comes in the form of bank loans and credit cards. Debt finance is money that is lent to your business. It will cover all of your business costs but you are required to pay it back. You will have to repay debt finance on a monthly basis with added interest. Before you agree to take out debt finance it is important that you are able to keep up with the monthly repayments. To find this out you should investigate your expenditure and ensure that you will be able to keep up with the payments sufficiently.
The second word that you need to know is equity. Equity finance is money that is invested into your business for a share of your business. You don’t have to pay this money back at any point within your business but it does mean that you lose an aspect of control over your business.
Within every business there are five main components that are needed in order to ensure that your business operates successfully. These components are Personnel, Equipment, Housing, Products & Services and probably most importantly Capital. Without capital all of the other components wouldn’t exist within your business.
By: Helen Cox
Posts Tagged New Businesses
“I want to start my own business and be my own boss!” Sound familiar? It may, because nearly 95 percent of people have this pass through their thoughts at some point in their working lifetime.
“Get rich quick” schemes never work. Yet we are repeatedly bombarded with TV and other advertizing promising us riches and status if we join their programs to gain “financial success.” But regardless of if the program they offer is a valid means of making an income or being successful, the truth is, new businesses rarely show any amount of profit in their first two years.
It has been estimated that as many as 90 percent of new businesses fail in their first year. Lack of planning is the number one cause of new business failure; “financial planning” tops that list. Being financial smart is perhaps your best chance at success. Follow the basic guidelines listed here:
Avoid business loans requiring the collateral of your home. Never mortgage (or sell) your home to finance your business. Never use a credit card to start or operate a new business. Keep your business idea in proportion with the amount of money you have available.
Use common sense; if your means of financing your new business might potentially put a strain on your personal finances, look for other means to support the new venture. One should NEVER try starting a business to “save” a poor personal financial situation, unless the new business requires no monetary investment and can eventually supplement the personal income. Consider a business which utilizes your skills or services and requires little or no financial investment to start.
Be financially prepared to survive your first two years in a new business. Allow for personal income needs as well as the businesses financial requirements. You may need to “keep your day job” until the business gets established.
Better to be one of the 10 percent of new businesses who succeed, rather than facing financial and emotional devastation due to poor financial planning.
Carol Denbow is the author of Are You Ready to Be Your Own Boss? For more on new business start-up or to read about the author, visit www.BooksByDenbow.Weebly.com
By: Carol Denbow
Obtaining finance for your small or startup business can be an insurmountable problem. The number one problem that new businesses experience is a shortage of cash. So what is the solution for the small business entrepreneur? Let’s look at the sources of funds you can tap into and how to go about obtaining the money you need.
A business grant may very well be available right in your home state. The federal government doesn’t provide for small business in their grant programs. However, many states have development agencies that offer grants that are designed to assist the entrepreneur or small business owner either to start or expand their existing business.
It is vitally important that you do your homework before applying for a grant. Creating a business plan is a necessary evil that every application must have, even for existing businesses. Areas that the business plan must cover include an overview of the business and the business owners’ background, detailed description of the business or project and what funding is required.
A detailed projection of budgeted costs and potential income should be prepared, preferably with the help of a CPA or other qualified professional licensed in your state.
You will need to detail how the funds will be spent as well as a market analysis of your target market. The famous SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis will provide a good basis on which to assess the application for funds.
It is important to remember that SBA’s provide a source of attractive loans to startup business as well. It would be a good idea to list what collateral you have as well in your business plan. If you have already put funds or assets into the project or business it shows your commitment and could very well elicit a favourable response to your application.
In the final analysis, your success or failure to secure funding, be it grants or loans, depends on many different factors. To give yourself the best chance, make use of a professional accountant or other business advisor who will assist you in securing the best source of funds for your business.
By: Susan Mulder