There has never been more choice when it comes to business financing, with the rise of new lenders, investors, and innovators making it difficult for businesses to know where to look when it comes to accessing funding.
Whether you're looking at taking out a loan, selling equity in your company, or getting an advance payment on invoices – the diverse range of finance options for your business or start-up can be overwhelming.
So how do you find the best option for your company, what are the options available, and how will you go about obtaining funding? There are a few key areas that your accountant should be able to help with, such as writing a business plan, managing cash flow and meeting funders, that will increase your chances of successfully raising finance.
Let’s look at those areas in some more detail:
Writing a business plan
Your accountant will be able to help with the first and most important step – writing a business plan. A business plan is ultimately a roadmap for your business; it shows what you're trying to achieve and how you will get there. It's also where you can communicate exactly what makes your company unique and valuable.
This is an essential document for gaining access to finance from any source. If you're applying for a loan, your business plan should include a P&L, balance sheet and cash flow forecast so that the lender can see what their money will be used on and how it will generate positive returns on investment.
The business plan should also outline future growth and major milestones, and funders will want to know that you have a plan in place for achieving these goals. It's important to set aside time each year, usually at the end of your financial year, when your accountant prepares your accounts to make sure you're on track to hit the goals you've outlined.
Cashflow is extremely important when it comes to funding. In an ideal world, you'll have enough money coming in from sales and other income sources to be able to pay your suppliers, employees and the taxman – even if it's at a slow trickle – that way, you'll always be seen as a reliable source of income.
It might sound easy, but without a plan in place, it can be easy to lose control of this very important aspect of running your business. Your accountant will be able to help with managing your finances and planning your cashflow patterns, so you're never left without money when you need it.
Finally, coming up with the initial idea for a business is one thing, but finding funds that support your vision can be another. This is where the expertise of your accountant comes in. They'll be able to meet potential funders on your behalf and pitch to them why they should invest in you and your company.
In addition, your accountant should be able to help you with a financial plan, including future projections as well as meeting capital requirements for any type of funding that you're looking into.
So, now you know that an accountant can help with those initial hurdles when finding and securing funding for your business – what type of finance should you be considering?
Types of funding fall broadly into three categories:
Loans are one size fit all, and there are plenty of providers out there where you can borrow varying sums. In addition, there are two types of loans: secured and unsecured.
A secured loan will require some form of collateral (like a house, car, or building) to secure the funds, whereas an unsecured loan doesn't need any collateral, but obviously, these come with higher interest rates. Loans should be used to smooth cashflow, provide working capital or for business expansion.
2. Equity Finance
There are two types of equity finance – venture capitalist and crowdfunding. A venture capitalist will invest large sums of money into your business in exchange for equity in proportion to how much they have invested.
Crowdfunding is a relatively new option that has really taken off over the last few years. Businesses raise funds by offering non-essential goods or services to the general public in exchange for money that is donated through an online platform. This type of finance is usually used for project costs or business expansion costs that can be paid back over time.
Our mission is your success
At Blue Rocket Accounting, we want to help businesses and start-ups access the funding they need for their business growth. We have a range of services that can be tailored to meet your specific needs – from tax returns, financial plans and cashflow projections, to finding suitable finance options - so you can find all the funds you need as quickly as possible!
Our friendly team are waiting for your call! Feel free to get in touch for a no obligation chat on 01322 555 442.