How To Raise Finance For Your Business !

Most of us have at some point in our lives considered being masters of our own destiny as far as our earning capacity is concerned. Owning your own business can be a very rewarding experience, however the majority of us never actually take the plunge mainly because of lack of finance. In this article we explore how to raise finance.

In most businesses, finance of sorts is required, simply because you have to produce your products or services first before someone is prepared to pay you for them. In producing those products or services you have to spend money which may not be readily available in your business and that is why you have banks, investors, moneylenders etc.

Even as you expand, further finance may be necessary to support any activity that may increase before you make the sales and get paid. Your business can go bust if it doesn’t have the appropriate finance arrangements in place to deal with expenses that need to be paid before your customers pay you, even if your business is profitable. You need to try to match the appropriate source of finance for what you are trying to achieve. In general - long term finance for long-term investment and short-term finance for short-term working capital requirements. It is really important that you apply for the correct finance type for your business.

Get Your Bank To Say “Yes”
Banks are the major source of finance for small business in the South Africa. When applying for finance from your bank it helps if you follow these procedures…
Always produce a business plan. The main areas that need to be covered in a business plan are…
- The management team background with details of qualifications and experience.
- The type of business and industry you are in
- Previous trading history especially management accounts
- Details of the market in which you are going to trade.
- Likely extent of the competition.
- How you will market your business.
- A cash flow forecast for at least the first 12 months that demonstrates you can meet the loan repayments and a project profit and loss account and balance sheet.
- Your break-even point.
- A SWOT analysis of Strengths, Weaknesses, Opportunities and Threats.
- Details of any expert advice you have sought.
- How much you want to borrow and over how long.
- What other sources of finance you will be using.
- Security being offered.
- What savings, investments and other assets you have.
- A 2-page summary of the plan

Other pointers include :

asking for a 25% longer repayment period than you need and 30-40% more money than you need. Send your business plan to banks with an invitation for them to visit your premises. Make sure that you prepare your staff before the bank manager comes to your premises. Think of the questions that are likely to concern him and have your answers prepared. Always negotiate the interest rate and terms after the offer has been made, not before. There is normally an arrangement fee of at least 1% for bank loans. Try, by all means, to avoid personal guarantees but if you have to give them ensure they are limited to the amount of the loan.
Do not agree to too much security – only agree to the bank’s maximum exposure to loss.

We can assist in advising on the most appropriate source of finance for you and in putting together your business plan. Contact us at AW Accounting Services or email us for more information.