Is Your Start Up Ready for Finance?

For many start ups, there will come a time when external finance is needed to take it to the next level.

As a lender, our job is to determine if your venture is viable and able to benefit from taking a loan. 

If you’re at the stage where you feel you’re ready to apply for funding, you should be able to articulate why you need it, how it will be used and how it will help your business to grow.

Key things to consider are: Is the purpose of the funding clear? Is the amount requested appropriate? Be mindful to only ask for what you need, as a lender will not want to over-fund any venture. Also, you will not want to make higher repayments than you need to.

Our Start Up Loans Senior Business Manager, Mark Thayre, shares his top tips to help you establish if your start-up is ready for funding. 

Assets

If you need funding for essential assets you will need to research the associated costs and evidence this. Your research should include different options with pro’s and con’s for each. You'll need to provide a summary of why your chosen option is most suitable.

For instance, if you need specialist machinery, you may also need to research how much it will cost to run the machinery and factor this into your cashflow document.

It will give you an advantage if you can articulate any savings you could make by using the equipment, for example, if you need specific software, could automation save you time and resource?

Premises

If your application is to help support premises costs, you will need to research premises and articulate how this will benefit your business’ mission.

For example, premises location will be critical. Does your premises have the footfall you will need to sell your products or services? Does it have the storage facilities you may need for stock?

You will need to provide evidence that you understand the implications of taking on premises. For example, have your researched how much it will cost you to operate in bricks-and-mortar? How much will the buildings and contents insurance be? In addition, if you are likely to have customers visit your premises, do you need public liability insurance?

Any costs relating to your premises should be factored into your cashflow.

Customers

Showing that you understand who your customers are is important for any business. You do this through market research.

Market research is a vital part of your business planning because it will indicate the demand for your product or service. Your market research should act as the foundations of your business plan and marketing strategy.

If you feel you are ready for start-up funding, you should be able to define who your customers will be and how you will reach them.

Will your business be ecommerce? If so, what sales channels will you use to reach your customers? What marketing tactics will your audience respond to? It’s a good idea to gather up a range of tactics.

Have you tested your idea with your customers? Test trading will give you a good idea of how your customers will respond to your product and marketing tactics. Above all, effective test trading will go a long way to show a lender that your venture is viable.

Qualifications

Are you qualified to run the business you are setting up? The qualifications you will need will differ vastly from business to business.

For example, if your business is within the beauty sector, it is likely that you will need to be qualified before you can practice your chosen service.

You may need to undertake training to gain the level of experience you need to run your venture, are you prepared to do this? Do your costs factor this in?

Legalities

Similarly, it is critical that you consider legalities before you start trading to ensure that you are operating within the law.

Do you need specific licences or permits to run your business, or are there any regulations you need to abide by? Similarly, have you got the appropriate insurances?

Legalities are perhaps the most essential consideration, and you can find a wealth of helpful information and top tips over at Start Up Loans Legal Tips.

For licencing and permit information, a good place to start is on the Governments Licence Finder.

Survival Plan

Although you are planning to succeed, the reality is that lenders will need to see evidence that you have considered a backup plan.

How will you repay your loan if your business doesn’t generate the level of income that you anticipated? Do you have equipment you can sell, or can you create alternative income streams? Do you have a part-time job that you could fall back on?

Conclusion

In conclusion, if you've considered the above the points, you may well be ready to apply for start up finance.

There are many options out there for budding entrepreneurs, from grants to debt and equity.

Depending on your needs and type of business, we would highly recommend taking independent advice. If debt finance is appropriate, you may wish to explore the Government-backed Start Up Loans Scheme. The Scheme offers low-interest personal loans and free mentoring to help you start or grow a new business.

To find out more about the Start Up Loans programme, please visit our Start Up Loans dedicated webpage.

Further Information

For a comprehensive guide to the Start Up Loans application process, you can download our Start Up Loans Application Guide.

You can also visit the Start Up Loans website for useful templates and guides to assist your application.

About SWIG Finance

SWIG Finance is the South West’s leading delivery partner for the Start Up Loans Scheme, supporting an average of two new entrepreneurs each working day.

We are here to guide you through the application process, including advice on creating a business plan and cashflow forecast. 

If you would like an information chat with one of our advisors, please get in touch on 01872 227 932 or email us on info@swigfinance.co.uk.