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!
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; and
- Keep your credit history clean.
Funding outside the bank system:
- Investigate Government or other Grants;
- Angel investors;
- Crowdfunding; or
- 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.