You have done the required research, and written the business plan, now how do raise the funds required to kick-off of your business? Assuming you carried an initial research, you should have identified some potential sources of finances. If not, you can do this research easily on the internet by using the right keywords, checking what banks have to offer, and visiting your local business centres and libraries.
Also, while writing your business plan, you should have determined how much you need and what you need the money for, this will be important information when approaching potential sources. When raising finance from external sources, it is often helpful to show that you have personally raised or invested some money towards the business. This shows that you are willing to take a personal risk yourself, making financiers more willing to want to take the risk with you.
Sources of finance can vary, the easiest and most stress-free source is your savings. No one asks you questions, and you are not accountable to anyone but yourself. This is assuming you have saved some money before venturing out to set up your business. If you haven’t, don’t lose hope, there are still other means though not as easy.
A popular source that first comes to the mind of most people first is the bank. Should you choose this line or an external funding organisation, it is imperative that your business plan is sound. Sound, meaning it is well written, clearly defines the business idea, demonstrates potential, and return on investment. Simply put, your business plan is your written sales pitch in convincing an investor to lend you money. More important is having a relationship with the bank, having a guarantor who can stand for you, or assets as collateral. You can either apply for a loan or request an overdraft. Ensure you compare the interest rates and repayment terms offered by the various banks. Should you to consider borrowing money against your home, seriously consider this option and weigh the odds, as this could be risky.
You also have the Private Investors and Venture Capitalists. This is where things get more intricate and not as straightforward as getting a loan from the banks. However, Private Investors are willing to invest in more risky ventures but most times in return for shares in your company.
Venture capital funds are funds put up by investment trusts, pension funds, banks, insurance companies, private individuals and industrial corporations. These funds look to invest in companies that can reach significant profits in order to regain their money.
A popular source of finance these days is ‘Crowdsourcing’. This allows you to raise money from the public and interested for your business idea, and usually on the internet platform. In return, you are often required to give something back such a percentage stake in your company or profits. For more information, search the word crowdsourcing on the internet, and you will also fin websites who offer these services.
Another source of finance is family and friends who believe in the business concept and are willing to invest or lend to you the money with or without interest. An option also worth considering is ‘lay-by’ where a group of people come together to contribute money monthly, and the monthly lump sum is taken by an agreed contributor in turns.
Consider soliciting professional help when looking to raise large amounts of funds for your business. All in all, before investing funds into the business, ensure you are working with a financial forecast and plan you should have written as part of your business plan. All the Best!
