Every new business needs to consider key issues when sourcing finance and the realistic amount they need in order to get started and where the money will come from.
RECIPE FOR SUCCESS INGREDIENT CARDS
Ingredient 3: Financial Controls
Question:
What are the key issues when sourcing finance?
Answer:
For most this finance is to cover start up costs such as leases, licences, insurance, stock, equipment etc plus some cash flow to cover bills and meet costs before your business is able to bring in money from sales. So where will you get the money from to start-up and run your business?
The key issues to consider when sourcing finance are:
- Determine what your needs are.
- Consider how much and for how long you will require financial assistance.
- How will you repay it?
- What is the purpose of the assistance?
- Is it short term to assist with cash flow or perhaps a longer-term advance to purchase equipment, expand the business or increase stock?
Once you have determined your needs, investigate the alternative sources:
- Is your bank the most appropriate source from which to obtain the financial requirements for your business?
- Is there another source that would be more beneficial in the longer term?
Discuss any financial issues with your accountant before applying for financial assistance. He or she will be able to assist you with your application:
- Once several options have been chosen, thoroughly investigate each.
- What are the charges, hidden and upfront?
- How much will the finance really cost you?
- What happens if you don’t require the facility for the time you specified?
- What if you want it longer?
Only after you have done your homework should you arrange a meeting with your prospective financier. You will need your business plan and the answers to all the questions you are likely to be asked.
Consider what questions might be put to you – after all, why should this person lend you money? You must convince him or her that you are credible and worthy of a loan, have security upon which to base your application and be able to show how you will repay the debt.
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