How to finance your new or existing small business is a challenge and it is vital you discuss this important step with an experienced business advisor or an accountant before you commit to any offer to buy, lease or resign from your existing employment.
The options are:
- Use your own funds
- Borrow funds against existing assets [your home]
- Borrow against assets to be purchased
- Have an equity partner provide funds
- Use a debtor finance [existing business only.]
To borrow any funds the lender will be interested in five aspects:
- The quality of the security being offered
- Your ability to service any loans & repay in an agreed term
- The Business Plan and Cashflow forecasts
- Your previous business experience and ability to trade at a profit
- The potential risk you present to a lender
Before borrowing any funds it is important to understand exactly how much is required to fund capital purchases and how much working capital is required for the business to operate profitably.
If you are not an accountant you will need one to work this out.
The cash flow forecast will demonstrate the ability to repay the loan.
When and only when you have all five aspects covered are you in a position to look at what finance is available and what is the best option on offer from a variety of lenders and not just the local branch of a savings bank.