How_Do_I_Obtain_Capital_To_Invest_In_My_Business_Start_Up_

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					How Do I Obtain Capital To Invest In My Business Start Up?

Word Count:
1464

Summary:
You’ll almost certainly need to raise money to start up your company,
unless you already have sufficient capital yourself. The typical costs of
starting up are in obtaining premises, manufacturing your product if you
have one, buying materials, stock or equipment, marketing and fees for
external consultancy such as legal help, accountancy etc. Then when
you’re off the ground, you’ll need working capital to keep you afloat in
the gaps between paying your own invoices and recei...


Keywords:
commercial mortgages, raise capital, raise funds, funds for small
business development, mortgages


Article Body:
You’ll almost certainly need to raise money to start up your company,
unless you already have sufficient capital yourself. The typical costs of
starting up are in obtaining premises, manufacturing your product if you
have one, buying materials, stock or equipment, marketing and fees for
external consultancy such as legal help, accountancy etc. Then when
you’re off the ground, you’ll need working capital to keep you afloat in
the gaps between paying your own invoices and receiving payment from
customer invoices.

Again, your business plan is essential at this stage of setting up your
business. In it you will already have scoped out what your money needs
are and how you plan to raise the capital, and you’ll be using it to
persuade potential investors and lenders of the benefits of funding your
company. Your financial calculations in your business plan therefore need
to be thorough and accurate and presented with confidence.

Everyone expects that they’ll be able to stick to their plans and only
need to borrow the absolute minimum, but more often than not something
unexpected crops up to throw a spanner in the works. It therefore makes
good business sense to include a contingency element in the amount you
request. It’s better to do that now and have the extra cash as a
safeguard than it is to have to return to your lender or investor not far
down the line to ask for more money. If it wasn’t in the original plan
they are likely to be concerned about your financial ability and your
request may be rejected.

How much money should you request? This question worries all start-up
business owners. You want to make sure you have enough to keep you going
without struggling, but how much will your investors or lenders be
prepared to give? Most experts would advise that you should pitch
somewhere in the middle – don’t leave yourself short by requesting the
minimum, but at the same time don’t be greedy (and lazy) in asking for
too much. You want to keep costs to a minimum and invest your money
wisely in your company, while still having the security of a little extra
for backup if required. What you borrow should give you a realistic
challenge for your business but should not be too risky. And back up your
calculation with evidence in your business plan – it has to be credible.

People raise money for their company in many different ways, not always
from professional business investors or high street banks. How you raise
your capital will depend on your business needs and your own
circumstances. Here’s some information on various different sources of
funding.

Your own money – if you have enough cash to spare, putting up your own
money for the business means you don’t have to be in debt to anyone. It
will also give you full freedom over the running of your company as you
won’t be responsible to any other interested parties. On the other hand,
you’re risking a lot personally by investing your own cash and you could
lose it all – and not just your business, but perhaps also your home if
you obtained the money by taking out a secured loan or increased your
mortgage, for example. You should also be aware that personal borrowing
rates often have much higher interest repayment rates than business
deals.

People you know – if they have anything to spare, family and friends are
often more willing to give you cash than external lenders or investors.
Again, though, there is a high level of personal risk, both for your
family or friends who could lose money, and for you – it can cause
relationship tensions. If you do take money from family or friends, treat
it as a formal business arrangement as you would with external funding
and agree clear terms and conditions. You want to protect both your
interests and ensure that there are no misunderstandings.

The bank – high street lenders usually have a variety of different
packages and there’s usually something to meet everyone’s requirements.
You’ll have to do a sales pitch to get your money though, and depending
on financial circumstances you might also be required to find a guarantor
or provide some sort of security. Don’t just go to your own bank – look
around for a good deal and do your pitch to various lenders. If nothing
else, it will give you good practice! If you think you might have more of
a chance of obtaining money from your own bank where you already have a
strong relationship and good financial history, then don’t put it first
on your list of visits – present your case to a few different lenders
first to hone your presentation and persuasion skills to a tee! Even if
you can’t find a lender to give you money, there is a government
programme that may be able to help. The Department of Trade and Industry
offers a Small Firms Loan Guarantee, in which it offers three quarters of
the borrowing amount to the lender as a security guarantee. In return,
you must pay an annual fee (which will be a small percentage of the
remaining loan amount) to the Department of Trade and Industry. Up to
quarter of a million pounds can be borrowed over a maximum 10-year
period.

Outside investors – often referred to as ‘business angels’, private
investors are rich professionals, often successful entrepreneurs
themselves, who are able to offer a great deal of capital in return for
an expected large profit and dividends when the company starts to make
money. The advantage of obtaining finance from an investor rather than a
lender is that they will not expect any financial returns until your
business is turning a profit. Also, as successful business owners
themselves, they can be a valuable source of advice to guide you in the
right direction with your company. A combination of investment and
lending might be a good option. Your business will seem a much more
attractive and secure prospect to lenders if you already have a sum of
capital to back it up. Investors will no doubt have a level of influence
and decision-making power in your company, though. Most will want to be
kept informed of what is going on – they will want to protect and develop
their investment, of course, so you will have a responsibility to them.
Also, when you start to turn a profit, it will be divided among everyone
who has invested so you won’t get the full whack. Finally, you’ll need to
put forward a very good business case to attract an investor – these are
very wise, shrewd and experienced entrepreneurs.

Government schemes – there’s a whole raft of options available to small
business owners from the government and local authorities in the form of
low-cost loans and grants – in fact far too many to mention here. Your
local business enterprise centre, chamber of commerce or local council
will be able to advise on what options are available for your type of
business. The loans are usually offered at very reasonable rates and
grants are of course non-repayable (although competition can be tough).
Such incentives are often given to certain types of businesses in certain
industries located in certain areas, particularly in areas that are being
regenerated and in fields such as science, research or engineering.

In conclusion, the key message is that however you get the money you need
for your business, you’ll need a very strong business plan – and you’ll
need to practise your skills of presenting to ensure you make a good
impression and a convincing case.

The presentation of the document itself is also important. Keep it clean,
crisp and sharp. Use a business-like typeface, use colours sparingly and
use spreadsheets to create neat graphics. Have someone else look over it
for you when it’s done to check for mistakes. Print it on good paper and
hold it together in a presentation folder or comb binding.

Don’t just plan to read out your business plan – people can do that for
themselves. Turn it into a slick presentation with a strong argument for
your case. Write down what you want to say and rehearse it several times
– in front of a mirror at first and then to family or friends. Confidence
is key and this will come with practice. Ensure that you know the details
of your plan inside out, including the figures. You don’t want the facts
to trip you up. It’s also a good idea to consider what questions
investors or lenders might ask and how you can answer them confidently
and convincingly.

				
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