Steps to securing funding for new business
SO, you have got a great business idea but you don’t have the funds you need to make it a reality. You’ll firstly need to have a solid business plan to help decide how you’ll fund your business as this will affect how you structure and run everything.
Once you have a strong business plan ready to go, it is time to start exploring your funding options. Here are important steps to help you secure the funding you need to kickstart your business:
1. Work out how much funding you’ll need
It may seem obvious but your business plan won’t be complete without a cohesive understanding of how much funding you need to enable you to launch or grow your business. Spend time working out your forecasts and financial strategy – you will be quizzed in depth on this by anyone who is considering giving you investment.
Assessing how much capital to raise requires an understanding of the company’s forecast financial performance, including those initiatives that funding will be used to accelerate.
2. Determine whether self-funding is viable
Bootstrapping, or self-funding, is a combination of your own personal savings along with help from family and friends. Self-funding will mean you retain complete control over your business, but you will also be taking on all the risk, so be realistic and cautious with what you can afford.
Understand that withdrawing from pension funds is often not advised as it could hinder your retirement age and speak to a financial advisor before making a decision like this.
3. Secure venture capital from investors
Investors, either angel investors or investment companies, give funding to people looking to start or grow an existing business.
If going down the investor route, it is important to be aware that you will need to give up some portion of the control and ownership of your company in exchange for your funding, often in the form of shares in the company or with the expectation of financial return.
4. Consider a business loan
To retain complete control of your business, you may want to apply for a business loan through a bank. Most banks will expect you to have a strong business plan, a breakdown of your expenses – think set up costs, staffing costs, software management tools, web development, etc. – and your financial projections for the next three to five years.
Knowing this will help you determine how much funding you’ll need and also help the bank feel confident in giving you the loan. Be sure to check out various banks to ensure you get the best loan terms.
5. Hire in a business coach
To give your business the best possible chance of raising finance, consider hiring a coach who has sector experience and can guide you through the process.
In many cases, the ability to secure funding to pursue your growth plans will enable you to achieve your personal and business goals, so it is important to give yourself the best possible chance to achieve this.