Both new and expanding businesses need money to fund their projects. Your business must get funding for each item it requires to operate: working capital, ongoing expenses, tools, equipment, buildings, patents, etc.
Once you’ve established your needs, you must determine what sources of funding are available to meet them. This information is often presented in a table showing how each need will be met.
|Land and buildings||$200,000|
|Furniture and equipment||$25,000|
|Other start-up expenses (accounting, taxes and licenses, insurance, rent, supplies, etc.)||$15,000|
|Contributed cash and assets (equity)||$102,500|
|Line of credit||$20,000|
Funding your working capital
Determining how much working capital your business will need requires extensive research, reflection and planning.
Working capital is the amount of funds required to cover day-to-day operating expenses. The amount of working capital you need is influenced by your business cycle. It must be sure take into account:
- Your suppliers’ payment terms.
- The time it takes to collect sales revenues.
The amount of working capital you’ll need is also influenced by your company’s development phase. Developing new markets and launching new products, for example, require major marketing efforts which will impact your business needs. Be sure to evaluate them carefully.
Like some subsidies, some financing is conditional to obtaining other sources of financing. It’s important to have a clear understanding of their interdependence when you draw up your project costs and project funding table. Will the project fall apart if a source of financing is withdrawn or refused by a partner? It’s best to have a few alternative solutions on hand.
Before you draw up your funding plan select the appropriate type of financing for your project.