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More of us than ever now dream of starting up our own business – whether it's to avoid a lengthy commute stuck in traffic, find a better work-life balance, work hard to generate more personal profit or even to create an organisation whose values are more closely aligned with our own. And since the advent of the smart web it's been easier than ever to get something off the ground and connect with potential customers online. That’s not to say, however, that it's always smooth sailing. You’ve had the idea, thought of a company name, given time to considering your vision and values, even registered your own domain –  now what? The point where you start to need investment can be a huge hurdle to overcome. It may be the first time that you’ve seriously had to convince others that your business truly is worthwhile. So how do you make the leap and secure funding for your business?

Think About The Type Of Funding You Need

There are a few forms of different business financing and working out which one you need is a good place to start. It can be the default position to assume you need to raise equity finance – either through your bank or with an angel investor. But if you start giving away large stakes in your business, it can become very difficult to shape it exactly as you want, and you may even end up compromising on things that are fundamentally the reason you wanted to go into business in the first place. 

Make A Contribution

You could also consider trying to raise a part of the sum through savings. Consider if you are in a position to temporarily move in with a relative for a nominal rent, or perhaps look at city-specific rent studies to see if you can downsize and move somewhere more affordable, so that you can put money towards getting your business off the ground. Find ways to streamline your budget so that you have more to contribute – this is also a great way to show other investors that you are serious. If you have a strong credit rating, you may be able to take on a portion of the costs you need as debt. This might seem a little daunting, but it does mean that you aren’t chipping away at your own control of the business, and is often a quicker and easier way to get things off the ground. Just make sure that you’re confident any debt is affordable for you and your circumstances. You could also look at a balance of debt and equity funding –  about 70/30 is a good split and one that capital providers often like to see. It can even help you to attract more equity funding further down the line, as it shows future shareholders that you have a financing strategy in place.

Demonstrate Your Financial Model

Using some financial planning software, you can create potential scenarios to show to prospective investors and financiers, to show what your plan would be in different situations. Show the diverse types of returns from your various sources of capital clearly. You will also require a 12-18 month cash flow forecast. Brush up your financial planning skills and you’re far less likely to run into trouble further down the line.

Chiino
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