Finance your business idea

Many entrepreneurs are ill prepared when approaching a lender, with as many as 80 percent failing to raise the finance needed to realise their business idea.

By David Sullivian, financial relationships manager, Access to Finance.

The challenge

For people just starting out in business or looking to expand, the biggest challenge is turning an idea into a realistic business plan that will encourage lenders to invest.

According to Business Link, 70 per cent of budding entrepreneurs still believe they do not require a business plan to successfully obtain funding. However, without a comprehensive plan, securing finance is difficult.

Other factors can affect the chances of successfully raising finance, such as the type of business idea you are putting forward. Almost nine in 10 of people didn’t believe this was an issue when looking to raise finance. 

As a result, one fifth of entrepreneurs turn to family and friends to help raise funds when turned down for finance, while only 12 per cent approach another type of lender. 

Help and assistance

Despite the challenges, obtaining finance doesn’t need to be an up-hill struggle.
Many entrepreneurs are unaware of the wealth of support that is freely available or subsidised through government initiatives.  

Access to Finance is one such programme that aims to provide the building blocks for securing finance and emphasise the need for a comprehensive business plan. With all schemes, a dedicated business adviser will work with an entrepreneur, taking them through the necessary steps to become finance ready.

Getting it right

With a little guidance, the most common problems associated with raising finance can be rectified:

•    The options: research and consider all avenues for sourcing finance. Businesses don’t have to limit themselves to banks when it comes to raising funds. Other types of finance such as grants, loan funds and investment capital are also available.

•    Plan ahead: new businesses need to prepare a comprehensive business plan that answers questions about where the business is going and how funds will be invested.

•    Be open: having a good credit history is important when looking to borrow from a lender, however, if you are not fortunate to have a good credit history it's important to advise lenders of your financial history and your commitment to repaying any finance raised.
 
•    What do you need: you need to ensure that you know how much is needed and for how long.

•    Think about security: the lender will be looking at the security of its investment, such as business/personal assets or guarantees, so you need to consider this and include it in your plan.

•    Be ready: prepare your case fully before meeting your potential investor and practise presenting it.

Entrepreneurs need to portray their business as a safe investment, which offers good returns. Someone going it alone, with little financial help needs to present a convincing argument.

Government initiatives are there to assist in making that argument and offer alternative finance options where possible along the way.

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By David Sullivian  on   Jul 08,2008

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Keywords

funding    product development    business launch   

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