Business Start Up Corner - Funding Your New Business Venture

Raising money for your new business venture is often the biggest challenge for a start-up entrepreneur. The truth is, it’s not that easy for an established business to gain funding either!

As a start-up business your chances of securing finance are improved if you have industry experience, good references and support from a great mentor. However, you also need to create and document the best business plan ever!

Business Plan & Cash Flow Budget

While the main reason most people prepare a business plan is to raise finance, your business plan should also prove the viability of your business venture. Included in the business plan is a cash flow budget for the first year of trading and a positive cash flow is an absolute necessity if your business is to succeed. Positive cash flow doesn’t just happen, it needs to be planned. That’s why we strongly recommend the preparation of a 12 month cash flow budget before you start your business. In fact, any business that fails to accurately forecast its cash flow in the first 12 months is on a collision course because without realistic cash flow projections, management is unable to identify future cash shortages.

The cash flow budget is based on a number of assumptions regarding the expected future performance of the business. The assumptions must be realistic and supported by research, available data plus known facts such as rentals or forward contracts. The information in your cash flow budget is designed to:

• forecast your likely cash position at the end of each month
• identify any fluctuations that may lead to potential cash shortages
• plan for your taxation payments
• plan for any major capital expenditure, and
• provide prospective lenders with key financial information

Of course, positive cash flow alone is not enough. The business must be returning a profit and the long term trend for both must be positive.

To obtain funding within the banking system you should:

• Practice your presentation skills
• Present credible references
• Produce an outstanding business plan
• Keep your credit history clean

Funding outside the bank system:

• Investigate Government or other Grants
• Angel investors
• Crowdfunding
• Seed funding (where an investor purchases part of a business)

Ensure your business plan contains all the different components including organisational, marketing, operational, financial and risk analysis. If you don’t know where to start contact us today.

Click HERE to download the full edition of The Business Accelerator Magazine for September 2014.