Business For Sale & Franchise Search Engine  
   
My Account
Search Businesses For Sale
Location:

Category:

to refine your search results use advanced search  
Franchise Opportunities

Sell Your Business, Starting at $20.99 per month
Small Business Resources > How Do I Obtain Capital To Invest In My Business Start Up

How Do I Obtain Capital To Invest In My Business Start Up

You’ll almost certainly need to raise money to start up your company, unless you already have sufficient capital yourself. The typical costs of starting up are in obtaining premises, manufacturing your product if you have one, buying materials, stock or equipment, marketing and fees for external consultants such as legal help, accountants, etc. Then, when you’re off the ground, you’ll need working capital to keep you afloat in the gaps between paying your own invoices and receiving payment from customer invoices.

Again, your business plan is essential at this stage of setting up your business. In it you will already have scoped out what your money needs are and how you plan to raise the capital, and you’ll be using it to persuade potential investors and lenders of the benefits of funding your company. Therefore, your financial calculations in your business plan need to be thorough and accurate and presented with confidence.

Everyone expects that they’ll be able to stick to their plans and only need to borrow the absolute minimum, but more often than not something unexpected crops up to throw a monkey wrench in the works. Therefore, it makes good business sense to include a contingency element in the amount you request. It’s better to do that now and have the extra cash as a safeguard than it is to have to return to your lender or investor not far down the line to ask for more money. If it wasn’t in the original plan they are likely to be concerned about your financial ability and your request may be rejected.

How much money should you request? This question worries all start-up business owners. You want to make sure you have enough to keep you going without struggling, but how much will your investors or lenders be prepared to give? Most experts would advise that you should pitch somewhere in the middle – don’t leave yourself short by requesting the minimum, but at the same time don’t be greedy (and lazy) in asking for too much. You want to keep costs to a minimum and invest your money wisely in your company, while still having the security of a little extra for backup if required. What you borrow should give you a realistic challenge for your business but should not be too risky. And back up your calculation with evidence in your business plan – it has to be credible.

People raise money for their company in many different ways, not always from professional business investors or high street banks. How you raise your capital will depend on your business needs and your own circumstances. Here’s some information on various different sources of funding.

Your own money – if you have enough cash to spare, putting up your own money for the business means you don’t have to be in debt to anyone. It will also give you full freedom over the running of your company as you won’t be responsible to any other interested parties. On the other hand, you’re risking a lot personally by investing your own cash and you could lose it all – and not just your business, but perhaps also your home if you obtained the money by taking out a secured loan or increased your mortgage, for example. You should also be aware that personal borrowing rates often have much higher interest repayment rates than business deals.

People you know – if they have anything to spare, family and friends are often more willing to give you cash than external lenders or investors. Again, though, there is a high level of personal risk, both for your family or friends who could lose money, and for you – it can cause relationship tensions. If you do take money from family or friends, treat it as a formal business arrangement as you would with external funding and agree clear terms and conditions. You want to protect both your interests and ensure that there are no misunderstandings.

The bank – “Main Street” lenders usually have a variety of different packages and there’s usually something to meet everyone’s requirements. You’ll have to do a sales pitch to get your money though, and depending on financial circumstances you might also be required to find a guarantor or provide some sort of security. Don’t just go to your own bank – look around for a good deal and do your pitch to various lenders. If nothing else, it will give you good practice! If you think you might have more of a chance of obtaining money from your own bank where you already have a strong relationship and good financial history, then don’t put it first on your list of visits – present your case to a few different lenders first to hone your presentation and persuasion skills to a tee!

Outside investors – often referred to as “business angels,” private investors are rich professionals, often successful entrepreneurs themselves, who are able to offer a great deal of capital in return for an expected large profit and dividends when the company starts to make money. The advantage of obtaining financing from an investor rather than a lender is that they will not expect any financial returns until your business is turning a profit. Also, as successful business owners themselves, they can be a valuable source of advice to guide you in the right direction with your company. A combination of investment and lending might be a good option. Your business will seem a much more attractive and secure prospect to lenders if you already have a sum of capital to back it up. Investors will no doubt have a level of influence and decision-making power in your company, though. Most will want to be kept informed of what is going on – they will want to protect and develop their investment, of course, so you will have a responsibility to them. Also, when you start to turn a profit, it will be divided among everyone who has invested so you won’t get the full amount. Finally, you’ll need to put forward a very good business case to attract an investor – these are very wise, shrewd and experienced entrepreneurs.

Government schemes – there’s a whole bunch of options available to small business owners from the government and local authorities in the form of low-cost loans and grants – in fact far too many to mention here. Your local business enterprise center, chamber of commerce or local council will be able to advise on what options are available for your type of business. The loans are usually offered at very reasonable rates and grants are of course non-repayable (although competition can be tough). Such incentives are often given to certain types of businesses in certain industries located in certain areas, particularly in areas that are being regenerated and in fields such as science, research or engineering.

In conclusion, the key message is that however you get the money you need for your business, you’ll need a very strong business plan – and you’ll need to practice your skills of presenting to ensure you make a good impression and a convincing case.

The presentation of the document itself is also important. Keep it clean, crisp and sharp. Use a business-like typeface, use colors sparingly and use spreadsheets to create neat graphics. When it’s done, have someone else look over it for you to check for mistakes. Print it on good paper and hold it together in a presentation folder or comb binding.

Don’t just plan to read out your business plan – people can do that for themselves. Turn it into a slick presentation with a strong argument for your case. Write down what you want to say and rehearse it several times – in front of a mirror at first and then to family or friends. Confidence is key and this will come with practice. Ensure that you know the details of your plan inside out, including the figures. You don’t want the facts to trip you up. It’s also a good idea to consider what questions investors or lenders might ask and how you can answer them confidently and convincingly.

About the Author
Benedict Rohan works as a freelance finance writer. Commercial Mortgage, Homeowner Loans, Remortgages. Website: http://www.mortgagenation.co.uk











Related Resources
Small Business Articles
5.5 Ways to Improve Your Business… RIGHT NOW!
7 Reasons Why Small Businesses Fail - And What To Do About It
Advantages and Disadvantages of a Start-Up Business
Auto Franchises
Business Lawyer
Businesses for Sale by Owner
Coffee Franchises
Costs of Hiring a Website Designer
Different Web Design Techniques
Dispelling the Common Myths about SBA Financing
Do Home Based Businesses & Franchises Really Work?
Do What You Love or Love What You Do
Do You Need Bricks and Mortar Anymore?
Does a Small Business Really Need a Website?
Easy Ways to Cut Business Costs
Financing The Deal
Food Franchises
Franchise Information
Franchise Loans - Apply for a Loan to Buy a Franchise
Franchise Reviews
Free Advertising For My Business
Free Small Business Magazines
Getting Into Business: Don't Start It! Buy It!!
Helpful Tips for Your Small Business Website
House Cleaning Franchises
How Do I Obtain Capital To Invest In My Business Start Up
How Factoring Receivables Can Help Your Business Grow
How to Apply for a Small Business Loan
How to Find a Small Business Web Design Company
How to Form an LLC
How to Incorporate Your Business
How to Sell a Business Online
Incorporate A Business Online
Making Sure That Your Coffee Shop Will Be A Success
Market Your Business on the Web
Marketing Tools for the Small Business
Opportunities To Work From Home Are They Right For Me?
Planning Your Small Business Website
Position Your Business to Outshine the Competition
Protect The Merger Or Sale Value Of Your Business: What You Can Learn From The DaimlerChrysler Deba
Purchase Equipment to Save on Taxes
Run Your Business Like You Have To Sell It
Sell a Business
Sell a Franchise
Should I Franchise My Business?
Should I Incorporate My Business
Signs Your Small Business Needs Debt Restructuring
Small Business Debt Relief
Small Business Health Insurance Options
Small Business Idea - How Can Problems Make Great Ideas For Businesses?
Small Business Loan Calculator
Small Business Loans for Small Business Owners
Small Business Payroll Solutions
Small Business Phone Systems
Small Business Resources
Small Business Web Design
Small Business Web Design Companies
Small Businesses - Survival of the Quickest
Starting a New Business - Is There a Big Enough Demand?
Starting a Small Business in Less than 24 Hours
StartupNation's 5 Startup No-No's
Steps to Starting Your Own Business
The Advantages of Unsecured Business Loans when Buying a Business
The Art of Business is the Art of Relationships
Turn Personal Expenses Into Business Deductions
Twelve Stress-Busting Tips for Small Business Owners
Unleash Your Marketing Creativity and Increase Sales
Using your Business Plan
What is a Balloon Payment?
What is an Angel Investor?
What is an LLC?
What is an Unsecured Small Business Loan?
What is an Unsecured Small Business Loan?
What is an Unsecured Small Business Loan?
Why Buy an Existing Business?
Work From Home Scams
Working with Web Designers for Your Small Business
Your Web Design Contract for Your Small Business
©2017 BusinessMart.com.
Broker Membership | Terms Of Use | Financial Disclaimer | Privacy Policy | Cookie Policy | Resources | Franchise Opportunities | Website Traffic Ranking | Sitemap | Careers | Contact Us