Thursday, 14 February 2013

Starting a business – obtaining finance

The ideal business model for a first-time start-up is a low capital model.  These types of businesses offer products and services that can be produced/offered on a small scale initially with minimal capital input and then scaled up as required to meet growing demand.  “Low capital” means for example products and services that be made/delivered from home or a premise you already own, by yourself, with minimal equipment and stock.  As soon as you require expensive machinery, stock, and staff, your capital requirements will grow.  If a factory is required, that’s definitely at the “high capital” end of the spectrum!

The reason a low capital business model is preferable is that it can be very difficult to acquire financing for a start-up business, particular if you don’t have a track record of success in this sphere in the past.  The critical document to assist you in acquiring funds is your business plan – this provides potential lenders and business investors an overview of your business goals and objectives, what exactly the funds will be spent on, and how these will generate a financial return to the business.