You have a fantastic business idea. Now couple that with the £1m you have sitting around in the bank doing nothing, hey-ho business funding sorted and the world is your oyster.
But back in the real world obtaining business funding is somewhat different, the £1m is not a luxury you have and you are looking at wider options to secure the funding you need to get your company up and running.
This quote came from the US Small Business Administration (SBA);
“While poor management is cited most frequently as the reason businesses fail, inadequate or ill-timed financing is a close second”
Which pretty much sums up why getting the right business funding is so crucial. So what are the questions you should be asking yourself.
Crucial Business Funding Questions To Ask
I feel the need, the need for speed…OK, Top Gun quotes aside the first key question is about speed of finance and repayment. Is the need for the business funding short term or long term? Can you repay the funding or do you need the cash left in your business for some time?
What is the business funding for? Are we talking about short term cashflow needs or is there a bigger capital expenditure that needs financing? If the business funding will go toward marketing then a note of caution is required, marketing is a difficult thing to secure funding for, far too speculative for many investors.
Do you need your funding all in one go, or could it be put in through tranches over a period of time? Does the business need to have done certain things to require the next tranche of funding?
Who is going to take the risk? This part can be key. If you are seeking to raise business funding then are you simply after the cash or are you looking for someone to share the risk with you?
Existing Business Funding Sources
Before you go seeking external investment you need to have covered off all your existing sources. Remember that if these options are backing away from offering to fund your company then it is highly likely an external investor will also back away.
The first sources of business funding should be a combination of;
- Your credit lines
- The Bank
If you can show that these sources are backing you then go for the business funding you want, if these sources are not backing you then go back and consider your pitch again.
If you have any questions about this post then please give Lime Consultancy a call on 01293 541333 or contact via the website here.
By Dave Farmer