Forming a company can be immensely rewarding and satisfying; however, as any entrepreneur will tell you, challenges are inherent in any business. One of the reasons why so many businesses fail is a lack of capital at inception. Raising finance for a business can be a very time-consuming affair; however, it is key for successful growth and need not be complicated.
When a company is formed, it is important that it is not under capitalized .Therefore, as it may take you some time to create the business plan itself, and it likely takes some further time before the finance actually reaches the business in the form of equity, it is vital that you give yourself time to plan. Failure to plan for the working capital expenditure required in those first few months can be a fatal or very expensive mistake.
The term ‘Finance’ can relate to many different fields: invoice discounting, overdraft, term loans, factoring, Small Firms Loan Guarantee Scheme, mezzanine finance, asset finance/leasing, equity and grants.
At this stage, it is important to establish which finance option is most appropriate to your company and likely to be available. Providers of each of these forms of finance have different requirements, and an essential element of a business plan for any finance provider, is that you understand their requirements and tailor your plan to meet them. However, it is also crucial for you to establish your own financial requirements, by setting out the following as clearly as possible:
-What sort of finance do you need and how much?
-How will you spend the money and when?
-When will you be able to repay the money?
-What are the risks?
Once you have established these facts and figures, you will have given yourself the best possible chance of raising finance