Business start-up resources

Ideas to Secure £100,000 for New Businesses

Bag of 10 pound notesStarting or expanding a business usually means you need some cash for those first-time expenses or, for example, to get a lease on a retail unit.

So unless you've just won the lottery, here are some ways to generate a £100,000 capital injection from sources that everyone can access.

Most ideas are straightforward in theory, but you should take professional advice in all circumstances.

Use Your Own Savings

Most new businesses are run by their owners either as a one man band sole trader or certainly with just a few employees. With interest rates still at low values perhaps you could remortgage part of your own home.

You should always seek specialist professional advice on this subject. You don't want to increase your mortgage then lose all your cash on a business venture that doesn't succeed.

Many new business owners inject a proportion of their personal savings for initial investment purposes. If you're applying for a bank loan, the institution wants to see you take on some of the risks of your new venture to spread the risk of lending from their viewpoint.

Friends and Family

Our advice is to keep personal and business interests completely separate. Sometimes someone you know may be willing to invest in your new idea. If you decide to go down this route, then you should have legal documents drawn up.

You should also take professional financial and legal advice on all issues. Sometimes people you thought you knew well might take a different viewpoint if things start to get tough in the years to come.

Loans from Banks

Bank loans are normally the first port of call for almost all new entrepreneurs. Although banks lend to many thousands of businesses each year, you'll still need to prove to them that you'll be able to repay any loans or overdrafts they may grant you.

One of the things they'll want from you is a completed business plan. You can find a range of completed business plans online that will get you started to complete this exercise before you approach any banks.

Each bank operates differently, and lending rates vary by institution. For that reason, it's best to shop around see what each is offering especially competitive interest rates on unsecured business loans.

Grants and Business Angels

There are various government departments that provide lending in the form of grants. This form of finance has reduced in availability over recent years. Most of the grants these days are regional, so it's best to contact your local council to see if they have anything for new businesses.

There are also specialist agencies and organisations like the Prince's Trust that aim at certain sectors. The Prince's Trust targets younger people and may help depending on your circumstances.

Don't believe there are no grants for you because there are plenty available. Why not start your search on the internet to see what their lending requirements are?

Leasing and Factoring

There are various leasing and factoring schemes that may be able to provide improved cash flow for your business. Although these are not cash injections in the traditional sense, they allow you instant access to sales revenues or spread the cost of assets over a longer period.

There are many advantages and disadvantages to factoring invoices. Therefore, it's prudent to take professional advice before you decide to go down this route.

Additional Notes on Applying for Bank Loans

From all the emails I receive, perhaps the main requirement is for you to raise bank finance. Here's a quick guide on how to approach banks for a loan for your small business venture.

Present More Than Just Ideas

All banks say that they'll lend money, but they won't lend on the back of just an idea.

You'll need to have worked through your idea showing how this generate profits in the short and medium term. You'll need enough profits to pay back the loan during the term negotiated as well as paying your costs on time.

Therefore, you'll need to prepare a comprehensive business plan to discuss with your bank before you start raising finance.

Approaching Your Bank

Here's a step by step process for approaching banks:

  1. Sketch out a rough idea of your new business onto a couple of pages with financial projections and your loan requirements.
  2. Total your assets together with any personal loans you have outstanding.
  3. Approach your bank and make an initial appointment with a business manager.
  4. Discuss the initial idea with your bank. You'll be able to find out if your bank supports you. Find out what type of information your bank needs to assess your application including the format of the documentation required.
  5. You'll need to go back once you have formulated your plan and discuss further.

Don't take no for an answer

If you get refused, find out why rather than just accepting their decision. Here are some of the main reasons people get rejected.

  1. Your sales and profits are too optimistic.
  2. The bank feels the risk is too high.
  3. Your idea is not robust over the longer term.
  4. The market for your idea is limited.

Once you understand the reasons for rejection, you may have an opportunity to re-pitch your plan. Perhaps you reduced your profit forecasts then received a smaller start-up loan. Although this result is not ideal, at least you can begin your venture. Once you have a positive trading history, you'll be able to go back for more investment.