It is a startling fact but the huge majority of business fail, often within the first 18 months of trading.
A major reason for this wide scale failure is that owners make poor financial decision during the infancy of their company. Make sure you steer your company safely through this sensitive time of its life by making the best financial options for your business from the start.
You Need Money
Business loans, personal loans, selling stock; however you go about getting it, it is a simple fact that you need money to start up a business. Once you get the business up and running you then need more money to cover the costs of everyday expenses. Then you have to think about expansion, for which you need money.
In the world of business, money is almost everything and, needless to say, for businesses without sufficient capital failure is almost a certainty. So what are the financial options open to you as a new business?
Fast Finance
If you´re a highly ambitious owner in an extremely competitive market then you should think about trying to get as much capital as quickly as possible. This will allow your new business to compete with the established big hitters in the industry. One way in which you can do this is to borrow large amounts of money from a commercial finance company.
Borrowing money from a commercial finance company allows you to raise a lot of capital quickly and, unlike equity financing, you keep full control of your business. That is, at least, as long as you’re able to keep up with the repayments: an owner who is unable to pay back the borrowed money may see their assets taken from them to settle the debt, this could include their company.
Another fast finance option is to get backing from a strategic investor. These are financiers that come from within the industry you’re targeting, so you can cut out the credibility issues that many new companies experience. However, if you’re not a forceful owner, then you can become dependent on the help of the investors and lose control of your company.
Organic Finance
For an owner who has their eyes set on long term growth, then steady finance rather than fast money is the key. One option open to such an owner is a grant. The government runs a number of grant schemes, one of which could benefit your new business. Grants are a great way to get what is in effect free money. However, the money you get may have strict restrictions imposed on it relating to what you can and can’t do with it. Applying for a grant can also take a lot of time and involve a lot of red tape.
Another option for a solid rather than spectacular financial foundation is a small loan from a bank. The amount that you’re able to borrow from a bank is likely to be far less than from a commercial finance company so the potential return on your investment may be limited. However, the risk is also reduced and the interest on a loan from a bank is generally much lower than that of a commercial finance company.