Growing Your Business: Raising Finance

Whether you need initial funds to start a business, or are looking to expand an existing business this checklist has been designed to cover all the issues you should consider before you make the final decision as to how much you want to borrow and where you will borrow it from.
Work through the questions in this checklist. They are designed to be relevant to both existing and new businesses.
Armed with the answers to all these questions you should find raising funds a much easier experience. You will also have gained valuable insights into the state of your business at the present moment in time.

1) How much do you need to borrow
A word of warning
A fact many people forget, is that whatever you borrow, it will have to be paid back - with interest. OK, obvious I know, but this is a debt, and one which may take many years to repay. It will be a recurring essential expenditure for a long time, which if defaulted on, would allow the finance company to call in the outstanding amount and effectively scupper your business for good. So, make sure that what you want to borrow can be repaid comfortably.
2) How much can you afford to borrow?
3) Have you got a cash flow projection to work out the answer to question 2
4) Do you need the money for long term or short term purposes?

• Try to pay the money back over as short a time period as can be managed.

5) Could you use an overdraft facility as a source of the necessary funds?

• Check the current rates for an overdraft.
• Often an overdraft can be arranged over the telephone

6) Could family members help with a loan?
7) Can the money be loaned by your existing bank?

• This is a useful first stop as you already have a history with them, allowing them to make a much quicker decision with a lot less hassle on your part

8) Are there any loans or grants available?
9) Depending on what you need the money for, have you considered leasing or hiring equipment/plant/vehicles instead of purchasing outright?
10) Could you turn personal assets into cash?
11) What security can you offer a lender?

• You may need to have the assets independently valued

12) Have you written a business plan outlining what the money will be used for?
13) Can you show a potential lender that your business is healthy or viable?

• Use documented existing orders or potential orders if you have any

14) Do you have a good credit history?
15) Do you have any other existing loans for the business?

• If so are they being repaid and what are they secured against?

16) Can you show projected profit and loss accounts for the proposed period of the loan?
17) Do you have an up to date balance sheet showing the current financial state of the business?
18) If you are approaching an individual or venture capitalist for funds, have you considered how much equity or control of the business you are willing to let go of?
19) Do you need funds because of poor credit control?

Have you considered invoice factoring?

Remember that no matter how good your idea is, how necessary the equipment is or how many orders you could lose if you don't raise the funds, the first thing any lender considers is, 'How likely am I to get my money back?' If it helps, look at it from the lender's point of you and consider, 'If I were him, would I lend myself the money?' You may be surprised how you'd answer!