How Do I Obtain Capital To Invest In My Business Start Up

How Do I​ Obtain Capital To Invest In My Business Start Up?
You’ll almost certainly need to​ raise money to​ start up your company,​ unless you already have sufficient capital yourself .​
The typical costs of​ starting up are in​ obtaining premises,​ manufacturing your product if​ you have one,​ buying materials,​ stock or​ equipment,​ marketing and fees for external consultancy such as​ legal help,​ accountancy etc .​
Then when you’re off the​ ground,​ you’ll need working capital to​ keep you afloat in​ the​ gaps between paying your own invoices and receiving payment from customer invoices.
Again,​ your business plan is​ essential at​ this stage of​ setting up your business .​
In it​ you will already have scoped out what your money needs are and how you plan to​ raise the​ capital,​ and you’ll be using it​ to​ persuade potential investors and lenders of​ the​ benefits of​ funding your company .​
Your financial calculations in​ your business plan therefore need to​ be thorough and accurate and presented with confidence.
Everyone expects that they’ll be able to​ stick to​ their plans and only need to​ borrow the​ absolute minimum,​ but more often than not something unexpected crops up to​ throw a​ spanner in​ the​ works .​
It therefore makes good business sense to​ include a​ contingency element in​ the​ amount you request .​
It’s better to​ do that now and have the​ extra cash as​ a​ safeguard than it​ is​ to​ have to​ return to​ your lender or​ investor not far down the​ line to​ ask for more money .​
If it​ wasn’t in​ the​ original plan they are likely to​ be concerned about your financial ability and your request may be rejected.
How much money should you request? This question worries all start-up business owners .​
You want to​ make sure you have enough to​ keep you going without struggling,​ but how much will your investors or​ lenders be prepared to​ give? Most experts would advise that you should pitch somewhere in​ the​ middle – don’t leave yourself short by requesting the​ minimum,​ but at​ the​ same time don’t be greedy (and lazy) in​ asking for too much .​
You want to​ keep costs to​ a​ minimum and invest your money wisely in​ your company,​ while still having the​ security of​ a​ little extra for backup if​ required .​
What you borrow should give you a​ realistic challenge for your business but should not be too risky .​
And back up your calculation with evidence in​ your business plan – it​ has to​ be credible.
People raise money for their company in​ many different ways,​ not always from professional business investors or​ high street banks .​
How you raise your capital will depend on​ your business needs and your own circumstances .​
Here’s some information on​ various different sources of​ funding.
Your own money – if​ you have enough cash to​ spare,​ putting up your own money for the​ business means you don’t have to​ be in​ debt to​ anyone .​
It will also give you full freedom over the​ running of​ your company as​ you won’t be responsible to​ any other interested parties .​
On the​ other hand,​ you’re risking a​ lot personally by investing your own cash and you could lose it​ all – and not just your business,​ but perhaps also your home if​ you obtained the​ money by taking out a​ secured loan or​ increased your mortgage,​ for example .​
You should also be aware that personal borrowing rates often have much higher interest repayment rates than business deals.
People you know – if​ they have anything to​ spare,​ family and friends are often more willing to​ give you cash than external lenders or​ investors .​
Again,​ though,​ there is​ a​ high level of​ personal risk,​ both for your family or​ friends who could lose money,​ and for you – it​ can cause relationship tensions .​
If you do take money from family or​ friends,​ treat it​ as​ a​ formal business arrangement as​ you would with external funding and agree clear terms and conditions .​
You want to​ protect both your interests and ensure that there are no misunderstandings.
The bank – high street lenders usually have a​ variety of​ different packages and there’s usually something to​ meet everyone’s requirements .​
You’ll have to​ do a​ sales pitch to​ get your money though,​ and depending on​ financial circumstances you might also be required to​ find a​ guarantor or​ provide some sort of​ security .​
Don’t just go to​ your own bank – look around for a​ good deal and do your pitch to​ various lenders .​
If nothing else,​ it​ will give you good practice! If you think you might have more of​ a​ chance of​ obtaining money from your own bank where you already have a​ strong relationship and good financial history,​ then don’t put it​ first on​ your list of​ visits – present your case to​ a​ few different lenders first to​ hone your presentation and persuasion skills to​ a​ tee! Even if​ you can’t find a​ lender to​ give you money,​ there is​ a​ government programme that may be able to​ help .​
The Department of​ Trade and Industry offers a​ Small Firms Loan Guarantee,​ in​ which it​ offers three quarters of​ the​ borrowing amount to​ the​ lender as​ a​ security guarantee .​
In return,​ you must pay an​ annual fee (which will be a​ small percentage of​ the​ remaining loan amount) to​ the​ Department of​ Trade and Industry .​
Up to​ quarter of​ a​ million pounds can be borrowed over a​ maximum 10-year period.
Outside investors – often referred to​ as​ ‘business angels’,​ private investors are rich professionals,​ often successful entrepreneurs themselves,​ who are able to​ offer a​ great deal of​ capital in​ return for an​ expected large profit and dividends when the​ company starts to​ make money .​
The advantage of​ obtaining finance from an​ investor rather than a​ lender is​ that they will not expect any financial returns until your business is​ turning a​ profit .​
Also,​ as​ successful business owners themselves,​ they can be a​ valuable source of​ advice to​ guide you in​ the​ right direction with your company .​
a​ combination of​ investment and lending might be a​ good option .​
Your business will seem a​ much more attractive and secure prospect to​ lenders if​ you already have a​ sum of​ capital to​ back it​ up .​
Investors will no doubt have a​ level of​ influence and decision-making power in​ your company,​ though .​
Most will want to​ be kept informed of​ what is​ going on​ – they will want to​ protect and develop their investment,​ of​ course,​ so you will have a​ responsibility to​ them .​
Also,​ when you start to​ turn a​ profit,​ it​ will be divided among everyone who has invested so you won’t get the​ full whack .​
Finally,​ you’ll need to​ put forward a​ very good business case to​ attract an​ investor – these are very wise,​ shrewd and experienced entrepreneurs.
Government schemes – there’s a​ whole raft of​ options available to​ small business owners from the​ government and local authorities in​ the​ form of​ low-cost loans and grants – in​ fact far too many to​ mention here .​
Your local business enterprise centre,​ chamber of​ commerce or​ local council will be able to​ advise on​ what options are available for your type of​ business .​
The loans are usually offered at​ very reasonable rates and grants are of​ course non-repayable (although competition can be tough) .​
Such incentives are often given to​ certain types of​ businesses in​ certain industries located in​ certain areas,​ particularly in​ areas that are being regenerated and in​ fields such as​ science,​ research or​ engineering.
In conclusion,​ the​ key message is​ that however you get the​ money you need for your business,​ you’ll need a​ very strong business plan – and you’ll need to​ practise your skills of​ presenting to​ ensure you make a​ good impression and a​ convincing case.
The presentation of​ the​ document itself is​ also important .​
Keep it​ clean,​ crisp and sharp .​
Use a​ business-like typeface,​ use colours sparingly and use spreadsheets to​ create neat graphics .​
Have someone else look over it​ for you when it’s done to​ check for mistakes .​
Print it​ on​ good paper and hold it​ together in​ a​ presentation folder or​ comb binding.
Don’t just plan to​ read out your business plan – people can do that for themselves .​
Turn it​ into a​ slick presentation with a​ strong argument for your case .​
Write down what you want to​ say and rehearse it​ several times – in​ front of​ a​ mirror at​ first and then to​ family or​ friends .​
Confidence is​ key and this will come with practice .​
Ensure that you know the​ details of​ your plan inside out,​ including the​ figures .​
You don’t want the​ facts to​ trip you up .​
It’s also a​ good idea to​ consider what questions investors or​ lenders might ask and how you can answer them confidently and convincingly.

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