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Raising Finance
5 steps to raising finance
- Determine your finance needs – such as hiring new staff, setting up new offices, investing in R&D, meeting cash flow shortages, purchasing other businesses. Your financing needs are likely to change as your business grows. If your business is growing rapidly, you may require more capital over the long term than you are able to generate in the short term. This means that a long term bank loan or equity finance is more appropriate than an overdraft. You can get more details on how we can help you in our Loans and Finance pages
- Prepare a business plan – this is a document that evaluates your current business status, explains management plans, describes the market in which your company operates, identifies and evaluates risks, shows the impact of new investment and provides credible profit and cash flow forecasts. If you are looking to raise a significant amount of finance, you may need to prepare a more detailed analysis of your cash flow projection to clearly indicate how much cash will be available and when.
- Decide how much you need – your choice of finance will be influenced by the amount you need and how long you will need it. You may need to work out a cash flow analysis and compare your requirements with your profitability or asset base. This will allow you to determine how much you need as well as how long you need it for.
- Review the financing options – there are many different sources of finances and it is useful to understand which finance type is best suited for each particular situation. Types of Finance provides more details of what could be available to you.
- Assess the risks – different finance options will affect business profitability and cash flow in different ways due to the way in which they are repaid. With equity financing, there are typically no interest payments so there is no impact on profitability or cash flow. With loan financing, interest payments are usually required and this may affect both profitability and cash flow. The cost of financing is dependent on how much risk the capital provider associates with your business.
