The first step is to have a great idea. This idea has likely been there for a while. Now you have the product, how you will deliver it, where you’ll set up your office and how to market your business. The problem is always the financing to get you started. A potential small business owner must find the financing to get it off the ground. Many new businesses can afford very little capital to start up because their main selling point is their owner’s knowledge and skills, such as web designers, consultants, and PR experts. Businesses that need stock holding, plant, equipment, or other investments face the challenge of securing their start-up financing. What resources can you use to get your business off to a strong start?
This is your first port-of-call! You should have enough cash if you’ve been working for a while before you decide to go it alone. This can be in the form either of cash in savings or shares and unit trusts. It is a great start to your fundraising endeavor. If you’ve been aiming to start your own business, it is easier to be focused on saving money. You can save money by knowing how much you will need to start your business. While a new Plasma TV and the latest DVD Recorder might seem like a necessary purchase, the fact that you have a business to start in the future is enough to deter you from spending your money!
Family and Friends
They can be a valuable source of financing for start-ups. Many of your friends and family will already know that you are pursuing a business venture if you have been aspiring for a while. It is important to know who supports it and who opposes it. You don’t have to share your secret desires if you aren’t already! Start drip-feeding your ideas, especially if you’re in the planning stage. You can share your ideas with them, your goals and ambitions, and keep them updated on your progress. It is important to sell them on your business and your future ventures early in the process.
When you’re ready to ask for contributions, host an Investor Evening. Prepare a presentation that outlines your plans and the market. Show potential investors how much they will receive in return for their support. You can invite as many people as possible and promise a fun and interesting evening. Once you are done with your presentation, gather the names of all those who might be interested in more information or a one-on-one discussion. While these people know you well and are more likely to trust your, you’re developing a new relationship that can quickly go sour. You should be prepared for some rough times.
Bank Line of Credit or Loan
You’re now ready to get serious! It can be difficult to get support from a Bank to start a business. Many entrepreneurs have experienced this. You can apply for an unsecured loan even if you are employed. You will be able to plan your future and know when your new job starts. So, before you quit your job, you can apply for an unsecured loan based on your current salary. You must ensure that you are able to afford the monthly repayments. There is no grace period. You will be required to repay immediately. Your business must start earning quickly.
A business line of credit is another option. The repayment dates are not fixed, but they can be extended for 6-12 months. All you need to do is to keep your overdraft limit within reach. To present the Bank with your business idea and business plan, you will need to create one.
Equity or Mortgage Release
The vast majority of homeowners now have significant equity due to the fact that house prices have risen over the past few years. A mortgage is an alternative to a bank loan or overdraft. A mortgage is a cheaper option to a bank overdraft or loan because the monthly payments are spread out over a longer time. However, you will pay more interest long-term. This way of raising cash is not the best for your home. A slow start can lead to cash problems if the ability to meet the monthly repayments depends on the income generated by the business. You must be sure that you are able to meet your monthly repayments, even if it is difficult.
Credit cards are a great option if you don’t have any savings or can’t get financial support from your family or friends. It’s very easy to get a credit card. But be careful! Credit cards are the most costly form of debt. These are great because you only have to pay the minimum amount. However, card debt can, as many people have discovered, be a burden over the long-term. If you require a lump sum of cash to start your business, and you are confident that you can repay it in a few months time, this alternative source of financing is worth looking into, even if it may seem unorthodox.
For specific reasons, certain industries and sectors may be eligible for business grants. Most grant providers will only provide a portion of what you need, so they can’t be used to fully finance a start up. They can however be helpful in filling funding gaps.
Business Angels are a popular way to finance a business. These are usually successful businesspeople who have retired and are looking to invest in new businesses. They will usually seek a share in the company and some direct involvement in exchange for their investment. They have extensive business experience, so they are a valuable addition to the team. You will need to accept some loss of control, but this must be balanced with your desire to secure funding. Although financing your business is difficult, there are many avenues you can explore. With dedication and focus, you could be well on your way to starting your own business.
Canadian Companies Can Benefit from Factoring Financing
Canada is a country with many challenges. Finding the right financing for your business has been a major challenge. Banks and other institutions dominate the market, with very strict lending criteria. It is difficult to obtain a Canadian business loan or any type of financing for your business. But, this is changing. Quickly. Canada has seen a rise in independent financing companies that specialize on business financing. While some companies offer business loans, most specialize in invoice discounting (also called invoice factoring). The Canadian factoring market is still young, but it is rapidly growing. What is invoice discounting?
Small and medium-sized businesses face a major problem when they wait up to 60 days for invoices to be paid by commercial clients. This can impact their ability to pay rent and suppliers on time. This is a problem that many businesses face, including trucking companies, staffing agencies and manufacturers. Invoice discounting, a financial product that finances slow-paying invoices, is called financing them.
Factoring is easy. After you have invoiced a client approved, you must send a copy to the factoring company (also known by the factoring company). While you wait for payment from your client, the factoring company advances you a substantial portion of the invoice. Once the invoice is paid, the transaction is finalized. This service is offered by the factoring company for a small discount or fee.
Invoice discounting provides the funding you need to pay rent, suppliers and salaries. You can run your business smoothly and not worry about when clients will pay. Invoice discounting can also help you win more clients by removing the worry of waiting for your clients to pay. Invoice factoring, unlike bank financing is easy to get. It is important that you only do business with clients who pay their invoices on a regular basis. Invoice discounting can be a flexible product and is easily accessible to small and medium-sized businesses.
Redeemable Factoring to Finance Your Business
Do you do business with government or commercial customers? If yes, you may also be used to waiting up 60 days for your invoices to be paid. It is difficult to do business with large companies because they pay slowly. They pay fine, but they take their time. However, you still have expenses to pay. Suppliers must be paid. It is essential to pay the payroll. This presents a challenge to small and medium-sized companies.
Is the solution a loan for business? It is not often. These are difficult to obtain. They are also difficult to get. You can only get one loan at a given time with loans. If your business expands and you require more money, you will be out of luck. Factoring in receivables is a better option if you have slow-paying customers. Receivable factoring allows you to finance employees, suppliers, taxes, and other expenses. It gives you peace of mind, eliminating or at least minimising your financial worries.
Receivables factoring is based on a simple principle. Factoring can finance your invoices, which are valuable assets. The factoring company advances money to you for slow-paying invoices, and waits until the customer pays. They charge a small fee for this service. This is how it works
- As usual, you do your job. You invoice your customer and then send a copy to the factoring company.
- A factoring company will give you an instant advance of 70% to 90% on the invoice. There is also a 10%-30% reserve. This money can be used to pay payroll expenses and for other purposes.
- Your customer pays the factoring company, but they wait.
- After they have been paid, the transaction closes and the factoring company reimburses any remaining reserves
Factoring allows you to get immediate cash for slow-paying invoices. This will allow you to grow and run your business. Factoring is easy. It is important to do business only with credit-worthy customers. If your customers are reliable but slow-paying, you can finance them. Receivables factoring can be a great way to finance your business or grow it.