Could your new business run out of cash?
by Dave Leaman, Business Finance Advisor on 20 November 2015
You will have noticed there are currently several ‘good news’ stories circulating in the media. Forecasts for UK growth are up, the housing market is rising, unemployment is falling, confidence in the economy is improving and expected to continue. The recession seems to be over.
So what does this mean for you as a potential business owner?
The good news is that you should see a continued rise in demand for your products or services as the economy moves forward. But to cope with this greater demand, it’s more than likely you’ll need to invest in key areas such as more employees, more stock or new equipment; even premises not only at the outset but in the first couple of years.
Ask yourself: “If our sales grow by 5%, 10% or more this year how will we fund the upfront costs and how much will we need?”
In order to take advantage of these opportunities, you’ll need to create a business plan with projections, (if you haven’t already) so you know exactly what your financial needs are and have a plan to secure the funds well before you need to start spending. After all, you wouldn’t buy a car without knowing how much money you have in the bank so why should your business finances be any different?
If this finance gap needs to be covered by borrowing, where do you go?
The first logical place to start is with your bank, particularly if you have established a good track record with them over the years.
Even if they say yes, it is worthwhile you or your advisors contacting other banks to sense-check that the terms you’re being offered are competitive. This will keep your existing bank on their toes. Why would you do this? Because you want to know about all options, much like you regularly compare quotes from different suppliers.
But what if your bank won’t support you?
Despite a good idea, many projects get turned down for a variety of reasons, like not contributing enough of their own monies to a proposal or not having enough ‘security’ (such as equity in property) to give the bank extra comfort. Some times, banks simply need to be selective about the projects they support and may not be able to support if they feel the proposition doesn’t fit their risk appetite.
So where else can you go?
Start Up Loans are of course an excellent option, available to all UK businesses in their first two years of trading. The Start Up Loans scheme is government-backed and available at a low fixed interest rate of 6.2% APR with no fees, making it quite a competitive opportunity. You can work with Outset Finance to apply for a Start Up Loan and find out more about eligibility criteria and the application process.
What else is out there? There are now more alternative lenders than ever with the most popular being independent (non High Street) banks, peer-to-peer providers and specialists with access to public sector and EU funding pots. I will often look at these options alongside the traditional banks when assessing the best-fit of finance for a business client.
If you’re interested in applying for a Start Up Loan, register with Outset Finance to talk to our team today about how to apply.
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