Raising Finance

We now need to consider how we are going to fund our business venture. I'm going to take a slight guess and assume that you haven't got a few thousand pounds just sat in your back pocket?? So where can we get this money from? What issues might we face?

Why do we actually need finance?

• Well we need to cover our start-up costs. 
• So before we even start trading we need to pay for raw materials, market research... you gotta spend money to make money!
• Then we have the set-up costs. 
• Are we going to sell from a shop front or do we need to pay for a domain online?
• We need finance to cover the day-to-day workings of the business. This is known as working capital.
• We may need finance because we want to take a risk and expand our business. 
• Finally, we may need a contingency fund for any unforeseen events.
• A large customer may not pay us or we may face a sudden decline in sales. 

But as an entrepreneur it's not just as easy as rocking up to the bank and walking away with the funds you require. We are likely to face some issues in raising the capital because we aren't trusted yet. You guys are in the prime and you may have some genius ideas bubbling away in those beautiful minds of yours... but you're fresh outta college... who in their right mind is going to lend you money? Who is to say that you won't just spend it all on McFlurry's?!

Another issue may be that you might not know where to look. Maybe you aren't aware of all the available sources of finance. So the bank turns you down... where else could we turn? 

Research for yourself...

• https://www.gov.uk/business-finance-explained

• https://www.kickstarter.com/

• http://startups.co.uk/raising-finance/

• http://www.smallbusiness.co.uk/starting-a-business/start-up-funding/2466737/the-five-mand39s-of-choosing-an-investment.thtml

Even if you are approved for a loan, banks and venture capitalists have to minimise their risk. Most loans will come attached with strict conditions and requirements. Check out hunky man below...

There are going to be certain factors that will affect our choice of finance:

• Cost - e.g. interest charge, equity (shares) given away, least expensive source
• Amount of money needed: £5,000 or £5,000,000
• Use of Finance - e.g. start up, temporary need due to supplier not paying on time, purchase a building.
• Status and Size - e.g. sole trader, limited company
• Financial Situation - e.g. your company accounts, security you can put up
• How long it will take to repay
• Consequences: interference from lender? Do you really want Nana to start asking where you're spending her pennies?! Or could you do with some advice from the bank?