Last week we discussed some of the issues you might face when growing your business. This week, read on to find out about the sort of investments you can get if you have a company.
If you have set up your business as a registered company, you may prefer to take out a business loan. As mentioned before, this limits your liability if the business fails and cannot repay the debt. Banks offer business loans to companies, partnerships and sole traders. A bank will want to see your business plan, evidence of the funds you are investing in the project, and details of how the business will repay the loan. If your business is already established, include accounts from previous years’ trading. Contracts with buyers to purchase your products and services in the future will also strengthen your case for a loan. The bank will probably also want to then hear from you regularly about how the business is performing and whether it is meeting targets.
You can also look for other sorts of investment. You may have a friend or family member who is willing to make a loan to the business. Make sure you are clear about the terms of repayment and what control, if any, they investment gives to the investor. You may be pleased if a relative loans you £5,000 to get started, but less pleased if they then start wanting to know every detail of how you run the business. Clarify things like this in writing before accepting loans.
You may also get finance from a professional investor, an angel. This sort of investor will be experienced at assessing businesses and business plans. They will be looking for a strong and growing business to give them a return on their money. An angel will probably want part of your company, known as shares or equity, in return for their money, and a say in managing the company.
Finally, if you are looking for large investments to the tune of hundreds of thousands, look into venture capital. City investors will finance a business, in return for a share in the company. This sort of investment will usually depend on your company meeting performance targets and financial goals. The investor may also want a seat on the board of directors.
Profit and pricing
When you are making your business plans, you need to be clear how you will make your company profitable. This applies from the smallest company up. Will you be supplying wholesale? If so, you need to calculate in margins so that your retailers can make a profit. They will want around 50 per cent profit after VAT, and you need to cover your materials, time, marketing and distribution costs too.