Wednesday, August 13, 2008

So you need Funding...

That old nugget.

What do you do if you need funds, where can you begin.

Well there are a variety of options available and it does of course depend on what type of business you are in. Risky high-cost start ups are catered for by business angels, banks and of course venture capital firms. Yes they are called vulture capitalists for a reason, but the way they see it - they're taking a huge risk investing in a new type of business so they need some sort of security blanket, and will take up a chew of your business ownership for their trouble.

For the more day-to-day businesses the first stop should always be your own bank or credit union. You have been giving them your business for years, so see what they can do for you. It's all about shopping around and remembering the most important thing - you are in charge. This is your business, they owe you nothing - if they give you a business loan, they are making money on it so although you can thank them for their assistance, there is no need to name your first born after them. Banks are in it for the money - never forget that.

They also hate risk. They are not insurance companies, they are completely risk averse, so the more you can reassure them that there is little risk to giving you a start up loan, the better a position you will be in, in the long run.

Contacts are key to business, we all know that. So apply that to your funding situation. That is why I mentioned going back to your own bank. I have a bank manager I can ring and chat to about my personal finances (or lack thereof!), at my local branch. That is what they are there for. If you are thinking about starting a business down the line and considering your funding options, start chatting with your bank manager now. They are as hungry for business as the rest of the world.

If the bank says no, there could be a million reasons why. So don't lose faith. Like in a sporting situation - have a look at the post-match analysis and figure out why. Ask them straight out, they might just tell you! It might be that your credit history is poor with them. Or that you have no collateral. Or that they believe the market you are trying to break into is flooded already (they may have an inside track on this, their current customers selling the same things as you, at the same location, may be in financial difficulty - a great way to find out the most important info on your new market, could be in your loan-refusal-feedback-chat!).

If that bank does say no, approach the credit union. Find your local one, here. The staff in the branches I have visited are very supportive of indigenous industry! Local business is good for business. Cheesey but true!

Business Angels are people who invest in your business without grabbing all the shares. Almost exactly what it says on the tin really. If you can find one, good on you! There are some around... There was a Business Angel network running for a while but the last I heard it was running out of juice. More recently I have heard of people finding their own angels. Back to those all important contacts! It could be family friends, friends of friends you meet at parties or conferences (or party conferences, shudder!) - it could be anyone at all. Someone whose eyes start to twinkle when you talk about your new business idea. If they have any sort of passion for your business, they might just lend you those all important funds!

First Step is a great organisation, although their coffers are always stretched. They will help you get a small loan, when all the others have shown you the door. First Step are what you call, the lenders of last resort.

I heard the County Enterprise Boards and Enterprise Ireland on Today FM a couple of weeks ago talking about starting a business, but they were more talking about doing Start Your Own Business courses (incidentally, they run all over the country, right through the year so you can find one near you if you really want to impress the bank manager). What they did mention - briefly - was their funding situation. If you are manufacturing something different, or if you are trading internationally, then they can talk to you about money. If you're not - they can't. It seemed pretty clear - if you want to get into retail for example, they won't be able to help fund you.

The one thing everybody will need, is a business plan I'm afraid! That's where maybe the CEB's could help. Some of them run business planning workshops - not all, so you'll have to check with yours. I've blogged about it before, here, so check back for a basic starting point. Email me if you need more detail... I wasn't planning on running any business planning workshops myself but for the price of a pint... ;) Who am I kidding. A hot port please, if this weather keeps up...

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