Published on 15/07/2016 by Punchmedia

New Financial Year New Business Opportunities

There are two things you need to start a business: an idea and cash. Now, generally you’ll provide the idea yourself. But the money, well the world would be a different place if everyone had enough money to back their own businesses.

Attaining financial backing for your business is a tough and competitive process, but if you know where to go, and how to approach your potential backers, you’ll have better luck. Below is our guide to financing your business.

Who will finance my business?

There are many different groups and organisations who can potentially finance your business by providing an investment, grant or a loan.

The Bank

Banks are one of the most common places people go looking for a business loan, but banks are wary of high-risk loans and you have to really impress them to obtain a loan for a new business.

You’ll need to prove to the bank your business will be profitable and you’ll be able to pay back the loan they give you. The bank will also assess you on your character, past successes and your skills and abilities as a business manager. You’ll also need to offer a security to back your loan if you’re unable to pay back the money; this could include personal property.

Business Grants

While not common, the Federal and State Governments do offer grants or special funding for small businesses and projects. These are particularly related to environmental services, the arts, research, and community services.

These grants can help you start your business, but are generally available to those looking to expand their established business or undertake a special project. To successfully obtain a government grant, you’ll need to have a strong business plan and idea, and show how your project will benefit the community to be successful in obtaining a government grant.

Venture Capital & Private Investors

Venture Capital (VC) firms are organisations which provide investments in a business or an idea which will provide high returns. You’ll pitch your company or business idea to the firm, and they’ll assess you as banks do.

There are significant benefits to approaching a VC firm. Depending on the size of the firm, they generally have the ability to provide significantly larger investments than the bank will. Due to the size of their investment, they’re also willing to provide businesses with resources and support to encourage success.

But a VC firm also expects high returns on their investment, and will ask for equity in your company. They can also take up to a year to reach a decision on investing in your company so if you need the money fast they may not be an appropriate option.

Private investors, commonly referred to as Angel investors, are wealthy individuals who invest in small businesses and start-ups with significant potential for growth. The investment they make is generally less than a VC firm could provide, but they’re less likely to ask for significant equity in your business.

The key thing about Angel investors is that they’re individual people looking to invest, and importantly, they want to invest in small and potentially profitable businesses rather than stocks or bonds. You’ll need to pitch to an Angel investor in a similar way to a VC firm or a bank, but they’re often quicker to respond.

Trade Creditor Funding

You may also be able to secure financial funding from your trade suppliers. This will not necessarily be as a cash sum, as creditor funding is generally provided through products or supplies, which you’ll reimburse with profits from the sale of these products.

This is a short-term source of finance. But using a trade credit system of payment can significantly affect your credit rating and you’ll need to be sure you’re careful and pay your suppliers when agreed.

How do I make sure my pitch is a success?

That’s the golden question with no definitive answer. There’s no one way to make sure your pitch is successful and you engage an investor or acquire a loan, but there are a few things you can do to help your prospects.

Have a solid business plan

A great idea for a new or expanding business is wonderful, but no matter what you’re trying to achieve with your finance, you need to have a solid and clear business plan.

Your business plan will need to outline your vision, goals and objectives, show research and understanding of your target customers, and clearly explain exactly how your business is going to make money and why it will be successful.

Your plan needs to persuasive, but experienced investors want all your claims backed up with evidence. You’ll also need to display innovation and a creative edge in your business plan to set you apart from other entrepreneurs and business owners.

Be professional and prepared

If an investor or bank is interested in speaking to you after your application, you’ll need to attend a meeting or interview to discuss your business face-to-face. First impressions really count here and you should dress to impress.

Practise your presentation and know it like the back of your hand. Bounce it off friends or family and let them ask you questions about your presentation. You’ll need to think about what questions they might ask you and have some answers prepared. Questions could be more about you and your character, or they might ask specific questions about what you intend to do with the money.

If you’re looking to get finance for your business make sure to shop around and look for the best finance deals or investors and VC firms who have similar values and business interests as you.

If you’re rejected or unsuccessful, ask for feedback and ways you can improve next time. If you’re really passionate about your business it’s important you don’t give up. Revise your business plan and exhaust all possible options. Eventually, you’ll find an investor or loan manager who has a shared passion or interest and will give you a shot.

 

punchmedia

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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