Financial Capacity

Have I got enough money to start my business?

Adequate funding is one of the basic building blocks for starting a business. In order to determine whether you’ve got enough money it’s important to consider the following questions:

  • How much do I need?
  • What will I do with it?
  • When will I repay it?
  • How will I repay it?
  • What can I offer as security?

Where can I get the money to start my business?

The usual sources of finance for small businesses are:

  • Personal savings
  • Loans from family and friends
  • Trade creditors
  • Bank loans
  • Venture capitalists
  • Grants

If you need to borrow money to start your business, you will need to provide adequate security to the lender before a loan will be approved. The lender will also need to know your capacity to service the loan so an indication of how you will generate cash to meet repayments is also important.  If this is the case, your personal net worth will determine your borrowing capacity to a large extent.

You’ll need to review your personal financial position (or personal net worth).Your personal net worth is the value of your accumulated assets less your liabilities. In simple terms, it’s the sum of all you own, less what you owe to others.This can be expressed in the following equation:

Personal Net Worth (net assets) = Assets – Liabilities

Will the government give me money to start my business?

In short - no. While there are no specific grants or loans available to help people start or expand a business in Western Australia, the Government (and some private sector organisations) do offer a range of programs and support services to assist with this goal.

How do I apply for a loan?

To secure finance you will need to convince the lender that you have the skills and ability to build a successful business. You will be asked to supply a range of information which demonstrates your strengths and past business performance, relevant to the business idea.

In general when applying for a loan the lender will want information on the business, your financial history, the amount and purpose of the loan, details on the security you can offer, and a monthly cashflow budget for the first 12 months of operation, including a loan repayment schedule. You're more likely to succeed with your loan application if you provide a well researched and presented business plan which includes:

  • your business goals and long term objectives;
  • market research that supports your financial projections and proposed borrowings;
  • information systems you will put in place to allow you to monitor the business and respond to changes affecting your projections.

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Alternative source of income

Be wary of the irregularity of income in the initial stages of business. If you are leaving full time employment and the security of a regular pay cheque, you need to know how much money you will be able to draw from the business. Business income may be inconsistent in the early days of operation so you need to ensure you’ve got something to fall back on, be it savings or borrowings.

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What's next...

  • Call 13 12 49 and make an appointment with a business advisor
  • How

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