How To Ensure You Have The Funds For Your Business
Starting a new business is an exciting adventure. The prospect of putting your own idea into a working market, building up your company from scratch and seeing success can’t be beaten by much. However, with all that excitement comes the hard work and grind of making your business get to where you want and achieving your goals. So, what can be done to make sure you have the best chance of success? Planning along with funding are arguably the most important aspects when it comes to the survival of a business within the first year of trading. Cashflow is the lifeline of any business and when starting, managing your funds and making the best use of the money available will be key to the businesses success. There are some tactics you can put into place to make sure you spend your money effectively when starting out.
Self-Funding, Help From Family and Friends:
Raising the money yourself is one of the more common means of raising funds for a new business. It might be via long term savings, selling assets or re-mortgaging, but it’s how owners get things started. Some people save for years, working on tight budgets to put enough away to fund their own company
Alternatively you could ask friends or family for additional capital. It can be a safe means of gaining extra cash, as you borrow from a source you find reliable and trustworthy, however, it can be a big risk borrowing money from people who are close to you. With lots of new businesses struggling you could ultimately end up owing friends or family lots of money from the result of a failing business.
This sort of loss could have a devastating effect on the people close to you, so it’s vitally important to make them aware of the potential losses involved.
Cash Efficiency:
It’s easy to get ahead of yourself when first starting out. Naturally most business owners want to buy things outright, so it’s easy to spend and spend. However, there are lots of things you can do to ensure you protect your cash flow.
Try to resist using all your cash to buy equipment outright. Asset finance can be a brilliant way of keeping one hand on the purse strings and keeping your cash flow healthy. Asset finance essentially gives you the option of spreading out some of your compulsory equipment costs over a period of a time. It means you don’t have to make one large payment up front, trimming the amount of cash you have before you’re even started, as well as making cash flow planning that bit easier.
As well as hire purchase, an alternative can be leasing. As opposed to buying a company car outright, a lease can give you a bit more breathing space when it comes to spending your cash. Paying in monthly amounts means you will have more funds when initially starting out, giving you a better look on cash flow.
During the process of raising asset finance, a finance broker would be massively helpful. They will help you decide on what is the best route forward when it comes to picking out leasing, or asset finance options. Most people start a business using their own finances, so making sure you spend at the right time is essential to business survival.
Bank Loans and Invoice Financing:
Bank loans are one of the more traditional methods for raising initial business funds. However, banks have become more selective when lending, especially to new start-up businesses. They will assess how much of a risk lending to your business can be. If you have a viable business plan and a great idea, usually you can agree a sum with the bank, but as a new business expect to have to provide security. Repayment plans are also put into place before an agreement is made, so you efficiently plan the viable means of paying the loan back.
For B2B businesses invoice financing can be a brilliant way to raise up extra funds, but unfortunately, not enough owners know that it can be available to start-ups. Effectively invoice financing lets you raise cash based on the value of your invoices. A factoring company can advance you a percentage of invoices, which can importantly boost your cash flow and free up time not to chase down late paying clients.
If you’re unsure on the most appropriate way to get funds, a commercial finance broker will be incredibly helpful. They will find you the best options available when it comes to finding a suitable bank loan, or asset financing deal. A broker may also be able to help you secure money for the business, if you were looking at a partner or possible investors.
Commercial Finance Broker:
Entering into a new business venture can be a confusing experience, so sometimes your best option is to ask for help. A commercial finance broker can help you ‘shop around’ for some of the best options when it comes to bank loans, asset finance and invoice financing. If you’re idea works, but are not totally confident when it comes to finances, a broker can give you that confidence and advice you on the best route forward.
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