Financing
In short financing means “Where do I find the money I need to make my
business operational”
The way you calculate the company’s capital requirement is:
• Take the total from the Establishing budget
• Add the biggest cash deficit from the cash flow budget
• Together the two shows the company’s capital requirement
The figure you get have to be financed one way or the other. The financing
can come from:
• Personal resources
• Families and friends
• Banks
• Investors
• Public funding schemes
• Suppliers giving credits
• Other
Sufficient cash
Being able to anticipate the capital needed to carry out work in the business
is of crucial importance. If you are short of capital to carry out your plans it
can be terminal to your business.
Cash crisis is often a killer of new businesses.
Obviously, there are many reasons why a company runs short of cash, but
one reason can be that the entrepreneur has not been able to raise enough
funds to meet the actual financial requirements arising after the setting up.
This problem is avoided by securing that your business is injected enough
capital to meet its requirements.
The two most frequent reasons that a company is undercapitalised are:
• From the beginning the entrepreneur has sought to save money or
limit the expenses
• Sales are slower that anticipated – consequently, the entrepreneur
runs into cash problems due to lack of income
Penny-pinching
Generally, limiting expenses or saving money is not advisable as this also
limits the firms activities and ability to progress.
Thus, you must anticipate the necessary costs of realising your concept
and you should not doubt the necessity of such scheduled costs.
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