It doesn’t matter what sector you are in, how much experience you have or how good your idea is, creating a successful business is exciting but it’s also a huge amount of hard work. The potential rewards can be great, however it’s a mammoth task. So, what can you do to increase your chances of success? Getting started is not easy. You have to plan, plan and plan, not to mention have enough cash to get the ball rolling. Cash is king and if you don’t have a healthy flow throughout your business, it will only end in trouble. Keeping cash is essentially important, as it is the lifeblood of any business; ensuring that you plan and save can keep you out of trouble. In terms of creating funding and aiding cash flow, there are some very effective tactics you can put into place to ease things along.
Whether you’re starting a new business or are already running one, having a reliable trustworthy accountant can be hugely beneficial for the business. They can offer advice on what sort of organisation your business needs to be (a sole trader, partnership or limited company) and provide good advice about taxation. Accountants can also relieve some of the workload on a business especially if you are a relatively new entity. Your accountant can also do all the necessary bookkeeping for certain records and tell you the correct places where your company needs to be registered. This can allow business owners to focus on their usual job and day to day running of the business.
There are plenty of funding options available. Here are top ways to fund your business.
Self-Funding, Friends and Family
One of the more common practices for starting a new business is self-funding. Dipping into long term personal savings, or selling assets to raise funds is what a lot of new business owners do. A lot of business save for years, working on a tight budget to put enough into a fund for their dream job.
An alternative, is finding equity from either friends or family. This can work well in some ways, as you are borrowing money from a trustworthy reliable source who you have a positive relationship with. However, with so many businesses ultimately failing, it can be a huge risk involving people close to you.
The loss of this capital can be devastating to friends or family, who in some cases could even be relying on you financially for results. If you are to involve friends or family, it’s essential to make them aware of the possible risks and any possible losses.
These are usually business entrepreneurs, willing to take risks and invest money into new businesses. Angel investors have more recently begun forming groups, so they can spread the risks of their investments as well as to gather more resources and research. Most angel investors need a lot of persuading and the hard part sometimes can just be getting sat down in front of them. There can also be more pressure through this form of investment than others. Angel investors are always looking to see where they can get their money back, they are always looking for a get out if things go wrong. This form of investments also means that as a business owner, you would have to give up part of your company. Sacrificing any part of a business is always difficult and although you can gain a significant investment, in the long run you could end up losing more.
Having a partner can not only be a brilliant source of funding for a business, it can also be hugely helpful with the running of the business. A partner can aid you with planning, budgeting accounting and the day to day aspects of the business, however, sometimes it can be hard for new owners to relinquish control. Partnerships can be hard to maintain though, as the initial business owner, compromising on your own ideas can be difficult and can lead you down a different path, which you believe might not be right for the business. Strategic partners can help aid your business by passing on eventual work. If they are in the same sector and run a mutually beneficial business, you can make recommendations for one another and effectively feed each other business.
For B2B businesses invoice financing is a fantastic option, but unfortunately not enough businesses know about it, or know that it can be available to new start-ups. Invoice financing effectively allows you to raise finance based on the value of your invoices. If your funds are low, but you have lots of unpaid invoices that your waiting on, a factoring company can advance a percentage of the invoices. This can give you those extra funds which you might need to boost your cash flow further.
During the process of factoring, the factoring company effectively manages your ledger and collects your outstanding invoices for you. They will take their fees, before returning you any residual balance. One of the biggest benefits of factoring, is not only the additional funds that come your way, but also the time it can give business owners. Instead of collecting invoices from late paying clients, you can focus on other aspects of the business.
Bank loans are perhaps the most traditional and well-known form of business funding. Banks have maintained that they are willing to loan, however, they have tightened up their criteria. If you have a viable business plan, with a solid idea and plenty of potential there’s no reason you shouldn’t be able to get a bank loan. Even if your business is going through a bit of trouble cash flow wise and you have had to pay a large cost, if the bank recognises that the business can work, you can still get funding via a loan. However, it’s not always the most viable solution to an emergency problem.
If you are unfamiliar with the process, applying for a bank loan can be a stressful procedure. It requires a lot of admin work and planning. If your business is experiencing difficulties during this time it can make the application even more stressful. Most banks usually require two years’ worth of company accounts. If you are a new start up and unable to supply these accounts, banks will normally require security against your assets.
Commercial Finance Broker
If you are unsure about the best methods to raise funds, then just like with asset financing, a commercial finance broker could be the best way forward. If you require a bank loan, or need invoice financing, they can find the most viable option for you. If your idea is brilliant, but you’re not totally confident when it comes to finances, a broker can give you that boost when it comes to securing money for the business. In a similar fashion, if you are looking for an investor or partner (rather than borrow money) to grow your business a broker can often help find a suitable investor.