Launching and managing a business is a complicated task, even for the well prepared, and central to the process is business funding. It is key for any business and vital for developing products or services, hiring staff and acquiring necessary overheads.
Where to ask for help
Advice and guidance are crucial for any business owner, and this is particularly true when it comes to business finance. Alarmingly, in a recent poll commissioned by Start My Business it was revealed that over two thirds of business owners were unsure who to ask for business finance advice, an issue which was particularly evident in business owners under the age of 25. Knowing who or where to ask for help is half the battle. Asking professional networks of fellow business owners is a good place to start, gaining first-hand experience from those who have previously gone through the funding and financing process.
Know your options
Perhaps the most important tip for funding a business is to know the options available to you.
Whether it be bank loans, venture capitalists, crowdfunding, grants or other types of loans, being aware of the various options available is hugely important to find the right option for your business, whether it be in start-up phase or looking to go for growth and expand overseas.
Sites like Start My Business which not only provide advice and tips across a multitude of areas, including business finance, but also offer free digital tools to connect business owners with various finance options.
Have a clear funding plan
In order to get the most out of your funding and grow your business, planning out the amount of investment you may need and breaking it down by short-term and long-term funding needs can help answer the question of which funding option or options work best for your business.
It sounds simple but knowing how much money you are likely to need and when you are likely to need it can greatly help when pitching to venture capitalists or applying for a business loan, whilst making the process more manageable due to spreading the funding requirements out over time. Banks in particular like to see a clear, well thought out business plan before committing to any loan agreements.
But within planning, it is important to budget for contingencies. If you have a product or service that isn’t fully developed, it is worth considering the extra cost should a setback occur, of if you suddenly need to go on a hiring spree to meet demands.
Understand credit scores
Taking the time to understand what a credit score is, and how to ensure you and your business have the highest credit score possible can make acquiring funding an easier task.
The better the credit score, the more likely you are to have easier access to funding options at the bank or other routes, which is why being aware of both your own and your business’s credit score is important. Ensuring a high credit score can also help secure better interest rates for business loans, or more favourable terms on company credit cards, having a knock-on effect when it comes to funding as re-payment plans become easier.
Take precaution with personal financing
It can be tempting to dip into personal savings or ask a relative for funding, and whilst these are perfectly viable options, precaution should be taken before immediately rushing to empty your bank account.
Relying on personal savings or capital from friends and family can place a huge strain on your personal life and relationships which can, in-turn, lead to greater stress and a decline in mental wellbeing. Should this happen, it can have a negative effect on the rest of the business.
If this is a route that is explored, it is important to discuss all the possible options, whether it be the company going under, or how much risk to take. And once any terms are agreed, they should be set out in writing for transparency. Alongside these tips, it is important for business owners to learn from and rely on their past experiences, whether they be successful or unsuccessful, and pass on what they learn to ensure everyone thrives as business owners.