The million-dollar question for every aspiring businessperson is nearly always, “Where do I find the money to get my great idea off the ground?”
It can be easy for first-timers to underestimate how much finance is needed and for how long. Often, people are overly optimistic about how soon profit will start flowing back into the business, or underestimate the long-term cost and effects of overheads such as insurance, depreciations and equipment maintenance.
Don’t worry; it’s totally normal to be a little too optimistic when it comes to costs, especially if you have no previous experience running a business. When doing your figures and forecasts, it pays to be cautious and extremely thorough. Don’t forget to consider both up front and ongoing costs. Other things to keep in mind:
Before you visit your accountant or whisk your wealthy aunt off to your favourite wine bar, we highly recommend writing a business plan (an essential document that you’ll need when it comes to financial planning). Typically, a business plan should include detailed costs, pricing structures, margins and projected profits.
This important document is the first thing a commercial lender or any savvy lender asks for, so make yours as professional and business-like as possible.
And it’s not just banks that will be impressed. If you’re asking family or friends for financial assistance, your chances of being taken seriously will be greatly enhanced if you can show them your beautifully presented and cleverly thought-out business plan.
No matter who you’re asking to lend you money for your small business, be prepared for lots of questions, some of which might make you feel uncomfortable. Think through the answers and rehearse them in front of your partner or a close friend. The more polished your responses, the more confident you’ll feel when talking up your business idea to a prospective source of finance.
Some of those questions might be:
Commercial lenders will typically ask for:
Put your best foot forward when talking face to face with possible lenders – and anyone else to do with your business. Dress and speak professionally, get your hair done (great excuse to visit your hairdresser), and carry your documents in a satchel. It’s also a good idea to find a babysitter for those times when Mum needs to talk business.
Your first port of call may be your own bank. However, the big banks are by no means the only source of small business finance. If you don’t want to go with your bank, there are several small business loan providers in New Zealand. Do your own online search and you’ll find websites that will allow you to apply online for a free business loan assessment.
Business grants from government or other organisations in New Zealand are few and far between. Whilst they do exist, they are generally geared towards research and development (R&D), and businesses with an established track record. They also often require an equal (50/50) investment from the business owner.
The Work & Income Enterprise Allowance is available to business operators who meet certain criteria. It is designed to help you overcome the financial barriers to self-employment so you can support yourself as a business operator.