Starting a business is fun, hard work, and sometimes very scary.
You’ve had the idea, thought through what you want to do, decided on if you’re delivering products or services, and are ready to go out into the big world of business. However, you need some finance for some of the essentials – equipment such as good computers (especially if you’re going to be involved in design of any sort), basic office furniture, and rent for premises if you need them to start with.
Certainly, many entrepreneurs start from a bedroom or study at home, especially in the tech world, but sometimes you need to give yourself more of a business presence. It’s not that you’re not serious when starting a business at home – many have successfully built businesses from there – but clients and customers often like to know there is an official HQ with a logo over the door.
Some success stories
When Steve Jobs and Steve Wozniak went into partnership, borrowing space from family and friends to assemble their computers and selling items such as calculators and a VW minibus, the long-term success of one of the world’s biggest businesses was laid down. From humble beginnings and with not a lot of money, Apple was born.
You could also look at Bill Gates who co-founded Microsoft and built it into a gigantic corporation. He was supported in founding a business early on by his parents, and that’s one potential source of financial backing for anyone involved in a startup.
Finding the money
You need to have a robust business plan to take to potential investors, regardless of the type of investor you are looking for. You have a range of choices, but make sure that your figures stack up, you have done your market research, and you can prove as far as you can that your business has great growth potential.
Remember, for the most part, investors are out to make money, so they will ask hard questions, though if you’re not dealing with financial institutions that may not be the case. Nevertheless, get your plans as watertight as possible. All investors know there are risks – they’d just like to make sure you have understood them and factored them in.
- Business loan: a bank or other financial institution may be the first place you think of to get some money. This is where your business plan has to be really watertight, as much as you can make it, because a potential lender will go through every aspect of it. It’s a tough lending climate at the moment, and many banks are unwilling to take risks with startups unless they are convinced they are likely to work. Look carefully at the interest you will be charged on a loan and factor it in.
- Family and friends: they are often a good place to turn to for financial support – they’ll believe in you and want to help where they can. If you don’t need too much seed funding, then it’s worth exploring.
- Payday loans: these can be helpful to get you up and running, especially in terms of paying yourself, any staff, and overheads. You could check out Ian MacKechnie of Amscot to find out more. Bear in mind that interest rates from this type of loan can be very high.
- Venture capital: run by a professional group, they have money but can be cautious and also may want to take more control of the business than you would like.
In the end, it’s your decision as the entrepreneur as to how to raise the finance you need. It’s always worth considering a range of possibilities and taking professional advice before you go ahead.