Get money to start a new business

Getting money to start a businessRaising money to start a business is not as daunting as it may seem, provided your business idea is good enough to make you money and give your financial backers a good return on their investment.

Did you know that there is more money available for good investment ideas than there are good investment ideas? Yes, and this is how you can tap into that rich seam of money.

Once you have your "Golden Egg" idea, you need to create a prospectus, or business plan. This is a very important document,as it will be used by potential backers to decide if you are worth considering for investment.

The first part of the business plan should be an executive summary of your new business. It should be no more than one side of an A4 page and should be written in simple language. It should give a definition of your business goals, show your main USPs (Unique Selling Points), define your market, and explain why you have the skills needed to make it work. Use bullet points to make it easy to read. Your busy investor is already doing you a favour by reading it and you want to encourage further reading.

Next, you should go into more detail about the proposed business,including the following information:

  • Business Entity (sole trader, partnership, ltd company)
  • Location.
  • Premises required.
  • Staff levels.
  • Specialist equipment.
  • Key personnel (background, education, skills etc).
  • Market. (results of your research)
  • Products or services offered.
  • Distribution
  • Your biggest competitors, and what makes you better.
  • Possible problems (and how you will overcome them).

 

Now you need to compile spreadsheets to show your five year projections for set-up costs, sales, running costs and overheads, profits, and cash flow. Note: 90% of potential entrepreneurs over-estimate their sales figures and under-estimate their costs, so make sure you prepare these figures carefully, and when you have finished see what would happen if you only achieved 75% of sales projected. If the result is bottom line losses then you probably do not have a viable business and need to re-think your business model.

Money to start a business

How much money to ask for

When you are sure your description of your new business is complete and positive, and your financial projections are achievable, you will then know how much money you need to get started and see you through until your venture becomes self-supporting. It will be much easier for you to get funding if you are putting a healthy percentage of the start up money into the business from your own pocket. Investors will rarely take on all of the risk for someone else's business and your own contribution shows them that you have faith in your own projections. Your business plan/prospectus must tell the potential investor:

  • How much money you need.
  • What it will be spent on
  • How much you are putting in.
  • Is a share of the business (equity) or a seat on the board on offer?
  • How the investment will be repaid (share dividends, interest, annually, quarterly)
  • Over what period of time.

Where to get money to start a business

Of course banks lend money to businesses, but there are many other sources you can consider too. There are investment companies who specialise in funding new starts in exchange for a share of the business if they think your idea is a good long term prospect. They are known as Venture Capital firms. You should also go to your local authority, who often give low interest loans or even grants to help new businesses get off the ground. Do you have any friends or relatives with savings in the bank that would give them a better return if they invested in you? Do you know of any successful business owners who might like to consider expanding their portfolio? Maybe you can get your total requirement by asking more than one source for smaller amounts. Remember, do not prejudge - do not be afraid to ask anyone to invest money in your idea. If you are afraid to ask anyone, is it because you don't really believe in it yourself? If so, then you need a better idea.

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