Tips On Raising Finance For A New Business

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If you are trying to raise finances for your new business, there is one important thing that you will always remember to put in mind; every lender wants to be sure that their money is safe and that there are high chances they will get it back. The reason for this is that as much as 80% of small businesses go under within the first year of operation. Money lenders know as much and as a result, they will want to ascertain several things before they can avail a loan to you.

The Business plan: A lender will definitely ask to see your business plan and, as such, you are obliged to make sure that you have completed one that clearly explains what you plan to do, how much money you intend to borrow and for how long you intend to repay it. You must also ensure that your cash flow and business projections are realistic.

Be Careful: Don’t be too optimistic in your projections or else your lender’s eyebrows will be raised. Lenders always know what figures will add up and this is why it is important for you to get help from an accountant or another related professional. You must demonstrate a clear understanding of the rationale behind those figures you have indicated.

Projections: Any projections that you make will definitely be based on a number of assumptions all of which must be clear to you. You should expect that a lender will question just about anything and, as such, if you fail to impress them by considering all possible eventualities, you are likely to fail if you don’t show any back up plans.

Past Performance: At the end of the day, the lender will look at your proposal and judge its viability depending on what you have mentioned; they will want to especially consider your past performance and what they know about your niche market. If you have done any business before they will definitely want to look at your past accounts so as to review your trading pattern and see if there are trends they can identify.

Your Accounts: Lenders are usually interested in knowing not just your book value bur rather the real value of all your assets so that they are sure there is a fall back place just incase they need to consider a forced sale. Apart from all your cash flow projections, budgets etc, and lenders have their own tools to assess the possibility of your breaking even. This means that you need to also include estimates of your fixed costs as well as your overheads and how they relate to your expected gross margin. At the end of the day, a lender is only concerned on the security of their money and a guarantee that you are able to repay.

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