Often the hardest part of starting a business is raising the money to get going. The entrepreneur
might have a great idea and clear idea of how to turn it into a successful business. However, if
sufficient finance can’t be raised, it is unlikely that the business will get off the ground.
Raising finance for start-up requires careful planning. The entrepreneur needs to decide:
How much finance is required?
When and how long the finance is needed for?
What security (if any) can be provided?
Whether the entrepreneur is prepared to give up some control (ownership) of the start-up
in return for investment?
The finance needs of a start-up should take account of these key areas:
Set-up costs (the costs that are incurred before the business starts to trade)
Starting investment in capacity (the fixed assets that the business needs before it can
begin to trade)
Working capital (the stocks needed by the business –e.g. r raw materials + allowance for
amounts that will be owed by customers once sales begin)
Growth and development (e.g. extra investment in capacity)
One way of categorising the sources of finance for a start-up is to divide them into sources which
are from within the business (internal) and from outside providers (external).
The main internal sources of finance for a start-up are as follows:
These are the most important