Raising finance is a real challenge for start-up businesses. Finance providers have expectations, requirements and limits you have to adhere to. You also have to understand how best to work with the market, depending on your stage of development.
Identifying funding requirements
Having a business plan in place will help identify your funding requirements. It will also help identify possible ways to resolve them. It is also important to detail the quantum of funding required and how you are going to use it.
For many start-ups, conventional debt funding may not be available until the business can prove strong, growing cash flows. Equity funding is likely to be the main source available to most companies in the start-up sector.
Terms of funding
When equity is being provided, the terms on which it is made available need to be considered. Equity funding tends to be more expensive than conventional bank debt.
Whether funds are being raised from family and friends or from a venture capital or similar institution, it is important that the terms on which the funds are being provided are set out in a share subscription agreement.
Investors and investing
Whether funds come from family and friends, angel investors, venture capitalists or EIIS funds, investors are investing in you. They are investing in your management team and on your ability to deliver. You must be able to prove you can protect their investment.