SETTING UP A BUSINESS

Getting the funding you need for your business

Whether you are setting up a new business or looking to expand one you already run, there are various options for sourcing funding.

However, before you do anything, it makes sense to set down all the expenses you expect to incur, from staff and stock to rent, VAT, telephones and IT. If you are going to be borrowing money to cover some or all of these costs, have a repayment plan drafted so that you only borrow in loans what you can realistically afford to pay back.

Here are some popular ways to fund a business;

• Personal funds – The cheapest way of taking out a loan is always going to be to borrow from yourself! However, if you do this, make sure you don’t spend everything you have but keep enough to stay afloat if things get difficult.

• Friends and family – This can be another affordable option. But everyone has to be clear of any potential risks, and don’t do anything that could jeopardise your relationship with those closest to you.

• Retained earnings – Another cheap idea, retained earnings are the profits you keep in your business when an organisation is up and running. No outside investment is necessary, and so this can be a good way of financing your plans for expansion.

• A business overdraft – This form of short-term finance can be helpful if you have cashflow fluctuations. It can be a quick, flexible and easily arranged way to get some extra funds and cover any unforeseen expenditure, although it should not be considered a long-term solution.

• Loans – These can help you acquire fixed assets – such as office machinery or equipment – and are goods solution where what you need is not going to change over time. Again this can be a quick and straightforward finance method. Match your loan requirements to your business plans, and choose a repayment plan to suit your needs. Look for features like a repayment holiday option, fixed interest rates, and no early repayment fee.

Finally, you could consider a hire purchase or lease agreement for buying the assets you need – or capture outside investors’ interest with a well thought out business plan.