If you’re looking to give your company a financial boost, you may find it more difficult than first expected.
Just deciding which form of finance is right for your business can be one of the most difficult decisions for your business.
Making the wrong decision could leave your business struggling long into the future, when the right decision could give your business the kick-start you’ve been looking for.
To choose the right financing option, you need to look at some areas of your business to help you to decide:
Business Plan.First and foremost, you need to prepare a business plan. In this plan, you should set out how your business plan will operate and determine financial forecasts. These financial forecasts will enable you to decide how much funding your business requires, what you need financing for and when you will need it.
Integrate Your Living Costs.You should include your own living costs when calculating how much finance you will need. The more accurate your financial projections are, the less likely you will have problems further down the line.
When making the big decision on which form of financing your business will require, you’ll need to take into account what kind of business you’re creating, how much money is required to get the business running and what you intend to use the money for.
Personal Savings. Many businesses are primarily financed through personal savings or personal loans. You may find that this is your only option if you can’t generate a cash injection from elsewhere.
Friends and Family. Although it may be difficult to approach friends and family for money, and it may seem like a good idea, you should take into account that if your business fails, they may never see their money again.
Bank Loans. Gaining a bank loan will be highly dependent upon how robust your business plan is. It may be that you just require an overdraft facility to handle daily borrowing, but need a loan for larger things, such as equipment. Be sure that you have your financial projections as clear as possible or the bank may consider your business as unprofessional and choose not to provide you with a loan.
Outside Investors. If your business is large enough, you may seek outside investment from ‘business angels’ in exchange for a share in your company.
Grants. You may be unaware that your business could qualify for a grant from the government.