We’ve all watched in horror (and amusement) as some poor soul is picked apart on Dragon’s Den, transformed from a sophisticated entrepreneur into a trembling wreck in a matter of seconds. Many start-ups fail as a result of bad planning, but it doesn’t have to be like that.
If you have a fantastic start-up business idea that needs a cash injection to take it up a notch, our guide will help you go to your chosen lender armed with a solid strategy that points toward success.
Knowing where to take your pitch in the first place is a task in itself. Whilst many may be apprehensive about approaching a bank, you may be surprised how keen they are to assist entrepreneurs. Just make sure you have an excellent credit score (which you can easily check using a credit reference agency such as Experian) and a solid business plan that has a strong focus on finances – they will want the money back after all!
The government has also extended its offer of a start-up loan to applicants of all ages, who can ask for up to £25k. If granted, you must pay the loan back at 6% over a maximum of five years, but you will also benefit from free business mentoring, which can be invaluable in those challenging early days.
A modern approach to funding is to go cap in hand to the general public on a crowd funding platform. Sites such as Seedrs allow investors to buy stakes in your business, which they can then capitalise on once you become profitable.
The other option is to go for a site like Kickstarter, which allows you to ask the general public for donations in exchange for a chance to be one of the first to benefit from your product or service.
Once you’ve targeted a lender, it’s time to work on the all-important pitch. The first thing you need to show is solid commitment – are you willing to work every hour under the sun in order to get off the ground? Many start-ups crash and burn not due to bad ideas, but due to poor organisation and a laidback attitude towards certain areas of their work.
It’s often easier to focus on the more glamourous side of your business, (such as developing your shiny new product or service), and neglect the boring bits (like the admin or finance). One simple word of advice: don’t. We all have weak spots, so recognise what they are and either delegate these tasks to your business partner or a freelancer, or knuckle down and teach yourself.
Without wanting to put added pressure on your shoulders, the success of your pitch will boil down to you as an individual. Look in the mirror and ask if you’d happily lend yourself £25,000. Prove that you’ve got the right character and drive to succeed, and that you’ve done your research and identified a market.
It’s also vital that any business partners or employees you will need have been carefully selected and have the right skills and training. One bad egg can break a fledgling business, so make sure you surround yourself with the best talent possible.
Whether maths happens to be your strong point or not, you’ll have to crunch the numbers and produce evidence that you’ve looked at every angle of your financials – aim to cover your first three years of trading at the very least. Your lender will of course expect you to know how you intend to spend their money, but they will also want to look deeper than that.
Will you be taking a salary or are you being funded by a partner or second job? How do you plan to reinvest profit in order to keep your business growing? And then, of course, the one you don’t want to talk about: what if it all goes horribly wrong? Yes, business can be unpredictable and for that reason you need to have a Plan B.
Securing a start-up business loan can seem like the impossible, but with so many different options at your disposal today, it’s not as tough as you think. As long as you know yourself and your business inside out, and go in armed and prepared with a rigid business plan and you can make it happen.