Finance for startup business

Without sufficient funding a business will fail. It is important to consider the following when looking at financing a new business:

Aim to raise more money than you need
Take a close look at what finance is needed as it is very difficult to approach a lender a second time and ask for more. If the figures are too conservative, it could make a business proposition unviable.

The bank is not the only option
There could be better and cheaper alternatives for raising finance, depending on requirements. If funds are needed to buy equipment, consider renting and leasing options.

Keep the people who matter in the know
Recognise the needs of all the people involved in your business, particularly banks and the inland revenue as they are more likely to be sympathetic to a business needs if they are kept informed.

Cash is king
Manage the cash flow properly. A business can be profitable on paper but if funds are not being received from customers then it is difficult to pay suppliers. If necessary, contact suppliers and renegotiate credit terms.

Consider payment terms
A sale is not really made unless it has been paid for. Credit check potential customers and if they ask for credit, get references from other suppliers who have worked with them. Payment terms should be included as a condition of the sale.

Chase debts and stick to procedures
Send a duplicate invoice to begin with, follow this up with a telephone call and, if necessary, consider legal action.

Prepare realistic forecasts
Forecasting does require a certain amount of estimating, but the figures should have some foundation. Update the forecasts on a monthly basis.

Maintain accurate bookkeeping records
Keep a record of everything – all payments, bank statements and bills. Bookkeeping may be one of the more tedious aspects of business for small firms, but it’s important to keep a firm track on money going in and out. There are a variety of software packages available to help computerise accounts.

Compare Business bank accounts
There is so much competition between banks and if a bank offers a limited period of free banking as an introductory incentive, make sure the charges are explained when this ends. Limit the number of transactions, particularly cash, as this reduces bank charges.

Negotiate
This could be anything from the rate of interest on a loan, to the time the loan repayments start, to payment terms with suppliers.