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Top Tips for Start up Finance
One of the most common questions we are
asked at BizHelp24 is about obtaining
finance for starting up or expanding a
business. There are no hard and fast rules
about what types of businesses can get
different amounts of finance, every bank and
bank manager will have different opinions on
what is a viable business plan.
To help you be better prepared for obtaining
finance, here are some top tips for getting
the funding you require:
Bank Loans
When people think of business finance, most
will think of a bank loan. You may find this
type of finance difficult to get, but it is
worth the effort as it can be much cheaper
in the long term than using a personal loan
or credit card for funding. You should pay
attention to the following tips to get the
best chance of getting finance from your
bank:
Before the Interview:
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Know exactly what you want – You need to
know the amount you want, and have a
good idea of competitive interest rates
and terms to stop you being ripped off.
You should know what sort of repayment
period you would like, what kind of
flexibility you want, as well as whether
you require an overdraft or other
facilities.
-
Know your market– The more facts you
have about the market you are entering,
the better you will come across. You
need to know about sales, trends,
competitors, and predicted growth.
Knowing the facts shows you are prepared
and demonstrates good planning skills.
-
Save up! – Very few bank loans will
cover more than two thirds of your
costs; after all, if you aren’t going to
put money into your business why should
they?!
-
Know your numbers – You should know your
estimated costs, your estimated
production and sales, your estimated
income, and ultimately, an idea of how
long it will be before you make a
profit.
The Interview:
-
Dress well – Be smart, tidy, and a few
minutes early; show the bank manager
that you are making an effort.
-
Show your abilities – Remember that the
bank will not just be judging the
viability of your business; they will be
looking at your ability to run it. Show
some of your skills, and be confident
and passionate about your business, but
avoid being cocky or arrogant!
-
Be calm! – Avoid rushing your words, and
try to speaking normally and calmly.
Credit Cards
The cost of most credit card finance is high
enough that you should only really consider
it after a bank loan. You could consider
applying for a card alongside a loan, as a
form of potential quick finance for
purchases or small invoices. The following
tips can help you get the best deal:
-
Beware of short term deals – Look for
the deals that offer the best for you in
the long term. Many short-term offers
end up with higher rates and conditions
later on.
-
Read every word – Never
sign up for a credit card (or any other
finance) without reading every single
word of the contract, and yes that
includes the small print! If you do not
understand something ask, and if
necessary get an accountant or qualified
professional to look over it. The lowest
interest rate is not always the cheapest
card.
-
Try your bank first – If you have a
business loan or bank account with a
bank, you may (occasionally) be entitled
to a better rate or conditions than
other lenders could offer. It costs
nothing to find out.
Family and Investors
Family and friends are a common source of
finance when a bank loan has been refused;
but they can make relationships difficult if
your business struggles.
Investors can provide good sums of money for
businesses that prove their viability; but
this will often come at the cost of equity
in your business.
You may get the finance you need, but the
investor (or family member) may ask for a
stake in your business. If your business
does well, then you could lose out much more
in equity than you would in interest from a
loan or credit card.
If you give away 50% of your business for a
£10,000 loan, and then your business grows
to a value of £100,000; you will have given
away five times the value of the loan in
equity.
Factoring
If you are expanding or have orders already,
then you should consider factoring as a form
of quick and low cost finance.
Find out more about factoring and how it
could benefit you here.
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