Unit 9 Raising Finance Sources of raising finance Language associated with raising finance.
Raising finance for your business
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Transcript of Raising finance for your business
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Raising Finance for your business
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Sources of finance
There are many places that you can go to raise Finance for your business
Bank Overdrafts Bank Loans
InvestorsFriends & Family
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Sources of finance
Bank Overdrafts
Advantages
-Short term financial support to get started -Getting money from the bank in this fashion is relatively fast
Downsides
-Can be expensive with high interest charges -Banks may require personal guarantees
-Interest rates may be variable so can fluctuate over time
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Sources of finance
Bank Loans
Advantages
--Borrowing is for a longer period of time -The rate of interest can be fixed and you can forecast your repayments -Once paid back you still have full control & ownership over the business
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Sources of finance
Bank Loans
Downsides
-Can be expensive due to the levels of interest -Certain banks may wish to spend time with you to understand the business and request financial reports pulling you away from your customers -Banks may require personal guarantees
-Repayments are not usually flexible and will require you to pay a fixed amount of the agreed term -Loans may be secured against assets of the company and you could lose assets if loans are not repaid
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Sources of finance
Investors
Advantages
-Investors may provide some support to you in the running of the business -Investors may take more risk and invest more into the business compared to banks
Downsides
-Investors may take some time to reach decisions about your business -The cost of investors may be considerable if not by way of interest returns but by way of their ownership in the business. -Your decision making process may be slower if they need to be approved by the investors
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Sources of finance
Friends & Family
Advantages
-There may not be such rigid ties to the administration of the borrowing compared to bank and investors -The arrangement of money may be quicker than other borrowing options. -Invariably the cost of borrowing will be cheaper than other arrangements
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Sources of finance
Friends & Family
Downsides
-Unless agreed at the start the amount of interest or the time to repay the debt may be disputed -Debts between friends and family can affect relationships especially in troubled times. -The length and valuing of borrowing may not be stable as it depends on their circumstances not just yours.
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How much do you need?Before you seek Finance be clear of how much money you need.
What type of costs should you consider?
Plant & Machinery Stock / products
Accountancy / tax costs
Office costs including furniture
Premises leases, refurbishment, rates,
utilities
Employee / recruitment costs
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How much do you need?Before you seek Finance be clear of how much money you need.
What type of costs should you consider?
Advertisement / promotional costs
Web site / e-commerce
Legal costs: company formation, patents,
licences etc
Transportation
Stationery costsGraphic design /
business logos etc
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Cash flow and profit forecast
Once you have established what your costs will be, plan when money will be spent.
Always add 20% of contingency costs as you may not be able to identify all the costs in a business plan
http://www.optimise-gb.com/business-templates
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Cash flow and profit forecast
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To ensure that you have covered all costs and accurately projected your revenues write a business plan…
See our web site for a free business plan template or purchase business writing software from:
http://www.optimise-gb.com/business-templates
Writing a business plan