Starting a Business
Approx 20% of start-up businesses are likely to become insolvent in their first year and the biggest reason for failure is the need for cash and cash management. Here are some of the finance mechanisms to give your company the best possible chance of long-term survival and sustainable profitability.
Personal Cash - Having enough cash to fund the start-up cost of a business is beyond most business owner's capability. One of the most popular ways to generate cash is to release equity from your house by taking out a secured loan, or re-mortgaging your house.
If this is not feasible, there are several personal lenders who lend on an unsecured loan basis to fund a start-up. Some famous entrepreneurs have also famously funded the start of their business empires with a personal credit card!
Business Angel - Business Angels are usually entrepreneurs themselves and are looking to invest modest sums in multiple new business ventures. They can bring advice and expertise to your venture. If an agreement can be struck it's likely you will have to sell a percentage of your business in return for the cash.
Venture Capital - If you are comfortable with swapping equity in your business for cash, venture capital may be an option. Venture capital firms usually specialise in specific sectors or operate within specific funding bands. Most venture capitalists shy away from providing 'start-up cash' and look to buy into a business when it requires second stage funding to take the business to the next level.
Governmental Funding - Recently private-public partnerships have been established to offer venture capital to young businesses.
Factoring - While factoring does not provide seed capital for a venture, it can accelerate cash flows by providing funding against raised invoices - ultimately meaning you don't fund unpaid invoices on your balance sheet. Compare factoring quotes
Asset Finance - Generally used to buy equipment needed to start your as long as you can pay a deposit. The underlying value of the asset ensures the lender can make their money back if the venture fails. Compare asset finance quotes
Once your business has been operating for a period of time (usually 1 year+) then other forms of debt finance become an option:
Commercial Mortgages - If you are considering buying a new business where property is a key aspect of the going concern (such as a care home or hotel) a commercial mortgage can help fund the purchase.
Forms of unsecured lending, such as business overdrafts and business loans, are usually not available to start-up and young businesses however they will become more viable options as your business grows. Compare commercial mortgage quotes
Business Loans - Lenders will look for strong proof that your business is stable and profit making if the loan is not secured. Compare business loan quotes