Need Finance For a Business Start-Up
You Have A Business Idea And You Need To Raise Finance
Congratulations on deciding to start your own business but you have a problem if you can’t finance the start-up with your own money.
It’s what is called a constraint – and until you resolve it, your progress will be slow or the lack of money may even stop your business intentions altogether.
To be blunt, raising cash for a business start-up is tough.
To find out why please read Why Banks Don’t Finance Business Start-Ups.
How Much Cash Do You Need?
To get a better understanding about how much finance you need, I recommend that you use a software program like Business Plan Writer or Sage Planning for Business to help you to prepare your own business plan and to crunch through some numbers.
It’s very easy to use, surprisingly inexpensive to buy (or even free) and it will get you to think through your business and see the effects of changes in the assumptions.
I used to recommend that people find an accountant but doing it yourself and having it professionally reviewed is better. I can help you to improve your business plan but I don’t believe you should hire someone to write it from scratch. (Find out why by reading Should I Pay For Someone To Write My Business Plan)
Solving The Cash Constraint
You have three choices:
- Changing your business start-up so that it doesn’t need finance from anyone else – this is recognising the finance constraint and making it irrelevant.
- Presenting your justification for finance so convincingly that you are offered finance – this is finding a way around the constraint.
- Changing your idea for a business to one that doesn’t need finance from anyone else – this is changing your goal to work within your constraint.
Raising finance is an easy solution to think of but it’s hard to do.
Personally I’m against debt if at all possible because many business owners find themselves working hard to pay the bank and are left with little for themselves.
Let’s take each of the ways to break your cash constraint in turn.
Changing Your Business Approach To Reduce The Money Needed
This should be your starting point, even if you decide you need to raise finance. The less cash you need to raise, the easier it will be.
There’s three elements to focus on:
- Your start-up costs – and how you can reduce them
- Your ongoing expenses – and how you can live within your means
- Your revenue – and especially how quickly and reliably you can bring in cash from customers.
I am assuming that your basic business concept is sound and it has low demand risk, competitive risk and capability risk. If you’re not sure please see
I can help you to find ways to close or reduce the gap between the finance you have and the finance you need and to strengthen your basic business concept.
This may mean that you can raise enough money from family and friends or from your personal credit card without having to get a bank involved in your business.
Strengthening Your Justification For Finance
If we can’t close the gap and you still need finance, we can look at how you can strengthen your case and make it more appealing to banks and other investors.
The business plan you present to a bank is essentially a “selling” document – you are selling the business concept and why they should invest their money into your business.
- Is the business idea sound? Are the demand, competitive and capability risks demonstrably low?
- Is the loan going to be profitable for the bank? (Are the initial fees, interest payment and probability of full repayment high enough to justify taking a small risk?)
If you need advanced guidance on raising business finance, my go to guy is Rob Warlow. Rob is a friend, author of the book Loan Sharp: Get The Business Finance You Deserve and a former bank manager in the UK and the CEO of a bank in Africa.
Below I share information on how you can get a copy of an interview between Rob and myself on loans for small businesses.
Changing Your Business Idea
If you can’t get finance or you accept that your case is so weak it is not worth trying, then you need to change your business idea.
There may be a business idea which requires less cash closely connected to your original idea or you may need to go back to the beginning.
Your Free Resources To Help You To Raise Finance
I’ve got three things to help you to raise finance for your business:
- The first is a pdf report How To Prepare A Better Business Plan
- The second is an mp3 of my interview with Rob Warlow, author of Loan Sharp: Get The Business Finance You Deserve
- If your business is based in the UK, I’d like to offer you a free, no obligation telephone consultation on how you can get the finance you need for your business.
Just fill in your name and email address. Your details won’t be passed on to anyone else and you can opt-out at any time. FYI the confirmation process takes you to another of my websites.