HOW TO FINANCE YOUR BUSINESS – PART 1
At every stage of a business life, the business owner will more than likely need to seek out additional finance. Whether it’s to start up, grow and expand into new markets or simply to keep it going through a tough patch, additional finance is needed. As a business owner, you know what you need the extra cash for. You can choose between debt or equity. Debt can be restrictive but it means you don’t have to give away equity or levels of ownership in your business.
In today’s article, I talk about ways to fund your business that our clients have used successfully. There are more than the space allows so I’ll share some more next month.
Personal Pockets
When you set up a business, you would typically use self financing to partially fund your business. If you’re reading this and thinking about starting a business, then I’d suggest saving as much money as you can to fund your business.
The reason I suggest this is many investors or funders will ask you how much capital you have to invest or have invested in your own business. It’s good to show that you have belief in yourself that you will fund your business out of your own funds. Re-investing profits back into the business is a must as well. If you’re going through a tough time, then consider cutting back on expenses which will allow more re- investment of funds.
Your Bank
There was a time where bank loans weren’t made available as a source of funding. However, I always advise my clients to be on good terms with your bank manager. This an easy process as the banks know you. It’s particularly useful if you need a small amount or a bridging loan. There will be restrictions, you will need to pay x amount by a certain time. Often, they may require you to personally guarantee it or put a charge on an asset.
Local Enterprise Boards
There is a local enterprise board in every county, more in the bigger counties. They are a great place to go and ask for help, to see what they can give you. They offer feasibility grants, research market demand as well as business expansion grants.
There is a caveat to the LEO funding. The grants they give typically only cover up to 50% of costs, so you will have to match the investment and pay the other 50%. In the long run, it does work out. What we have found is that it’s good to talk to the LEOs before you need financing so you are aware of what you could get and plan accordingly.
Microfinance Ireland
Microfinance Ireland is a not-for-profit lender established by the government to provide additional lending to startups and SMEs with less than 10 employees and with annual turnover less than €2m. They can provide unsecured business loans ranging from €2,000 up to €25,000 that can be used to fund the set-up and initial running costs of business. Sole Traders, Partnerships & Limited Companies are all eligible to apply.
Enterprise Ireland
If you are export oriented or exporting already, Enterprise Ireland can be a fantastic source of funding. They offer feasibility grants similar to LEOs, Research and Development grants, grants for exhibiting or visiting new markets. Each client company of Enterprise Ireland is offered a range of funding options, well worth considering.
Two things worth mentioning about Enterprise Ireland is the Innovation Vouchers and Female Entrepreneurship programme. The Innovation voucher, worth €5000, allows a company to work with a higher education institute to explore a business opportunity.
Enterprise Ireland are firm supporters of female entrepreneurs. They have a range of supports from their High Potential Start-Up (HPSU) to Competitive Start Fund.
Next time, we’ll talk more about tax breaks, seed funding and angel investors.
If you’d like to talk to us about anything in this article, please feel free to contact us. We can help keep your business in shape.