By Warren Bygrave - 22 Nov 2013
- 1 comment
One of the key factors in starting a business is
finance. The question to ask yourself is: do I have enough to
get me started and see me through the hard times? You cannot
assume that clients/customers will appear immediately. It
often takes longer than you think. There are enough risks in
business without increasing them by not considering all
possibilities.
I have previously mentioned the importance of having a good
business plan and model when starting up or buying a
business. This is where your lawyer and accountant can help
you. It may all be new to you and it is very easy to be
impulsive and take the first proposal you receive. Having done
your homework and created a good plan, you should know how much you
need. Also you should have calculated how and when you will
need to use your own and any borrowed money.
As with the structure that you choose for your business, there
are various methods and security arrangements available to
you.
Are you intending to trade in your own name or in
partnership? If so, consider your personal liability.
Are you intending to form a trust in order to limit your
personal liability and protect your existing assets? If so,
make sure that your loan does not allow the trust to be a
guarantor.
Are you intending to operate a company and limit your personal
liability? If so, ensure that you understand the extent of the
security which is being offered by your financier so that you
retain the protection which you have sought.
Take the time to understand the differences between various
forms of security:
- Mortgages
- General Security Agreements
- Guarantees, and
- how each of them applies to your situation.
The unfortunate aspect of needing to borrow when starting a
business is that your financier (usually your bank) has no actual
trading figures to go on. It has to draw on its experience of
lending in similar situations. As a result, it will seek to
increase your risk and limit its own. Do not be surprised -
expect it!
Most of us need to borrow to start up or buy an existing
business. Why not copy the boy scout motto and "be
prepared". Speak to your lawyer before you go too far and
commit yourself to loans and obligations you cannot change.
This investment will be life changing for you in so many
ways. So make your decisions knowing the facts and with the
odds as much as possible in your favour. The fewer the
surprises, the better your business and life will be.
Contact
Warren
Bygrave