So you have decided to start a new business? You have a novel idea or a better way of doing things? What’s next?
Our business advisory director, Nadia Sabaini, has developed a valuable 10-part guide for budding entrepreneurs looking to turn their idea into a reality.
In this guide, Nadia has identified the top 10 actions to consider before embarking on a new business journey. These considerations are invaluable knowledge for start-ups and can help maneuver your business down the right path with the appropriate awareness for the business environment in which you intend to operate.
#7: Take care when choosing how to finance your business
There are numerous ways of financing a new business venture and careful consideration should be given to the options most suitable for your business at start up and in the future, as well as the legal steps involved.
Capital raising options include:
A bank loan is a good option when you don’t need or want investors and are satisfied with the interest and repayment obligations.
Venture capital funds look for newly established or emerging businesses to invest capital in exchange for equity. There is usually a pre-agreed exit strategy such as an intent to later list on the stock exchange. A term of the funding is usually the acceptance of strategic advice by the VC fund, which typically wants to be fairly heavily involved in the decision making.
Angels are experienced investors, usually affluent individuals with expertise in specific fields or industries, who are willing to invest in new businesses in exchange for equity or a debt convertible to equity. Angels typically provide mentoring advice and offer their contacts, but rarely engage in day-to-day decision making. The amount invested is typically far less than venture capital funds.
Your business may be entitled to apply for start up grants or industry grant by local, State or Federal authorities. It is something every business should research as part of its planning.
If you are considering crowdfunding, take note that crowdfunding equity (shares) is the subject of new regulations by ASIC. You must be a licensed Australian crowdfunding platform and you will need to prepare a disclosure statement and other information to be made available to potential investors. Crowdfunding in exchange for a future product or service may be the subject of other regulations. Running a successful crowdfunding campaign is not simple and it requires careful preparation and marketing. You should consider engaging a consultant to assist you if you decide to crowdfund.
Keep in mind that the sale of shares in companies requires certain procedures to be followed, so seek legal advice before making offers of shares including to family and friends.
To find out more about capital raising, visit the Finance for your business page on the Australian Government’s Business website.
For more information regarding your start-up journey, download the full guide below or contact us today.
What’s next? #8: Don’t Forget to Sign Employee Agreements
Read from the beginning: #1: How to Make a Real Business Plan for Your Start Up
This guide is provided by way of general assistance only and for marketing purposes. Please contact us to discuss your personal situation and further information you may need.
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