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External Sources of Funding for a New Company


The acquisition of funding from external sources will usually require that time and resources are dedicated and that the investment will be put in to a viable proposition before it can be secured.

The actual amounts of effort which is applied to gaining a potential external source will depend on how important that particular funding is to the newly registered company and other options available to it.

Whilst there are many organisations, both privately owned and governmental which supply new businesses with funding, most start-up companies will be restricted to the more common avenues.

Loans as a Source of Funding

Loans, typically from banks are a frequently used source of finance for new companies. These organisations usually have dedicated departments with the requisite experience and knowledge of small business requirements.

Bank loans will often be secured on the assets of the company or in the absence of any significant commercial collateral, on the personal assets of the owners.

Proper consideration should be given to the idea of having a residential property or other valuable personal item exposed to the risk of business failure.

The views of the owner’s spouse and other relatives should be sought as they might be affected by the company being unable to meet the terms of the loan agreement.

At this stage it might be worth mentioning that you should discuss your business ideas and proposals with your spouse and relatives at an early stage and keep them in the picture from then on.

This might then help them to make an informed decision about what they are prepared to risk in order for the company to succeed. If they have no knowledge of your plans other than a vague recollection of you mentioning something about starting a business, springing on them that they might lose their house if your business fails might then come as a shock.

Although one’s relationship with their own bank might help in the application of a loan, it might still be worth reviewing the offerings from others. It is perfectly permissible for a person to have their private bank account with one organisation and their business interests spread amongst others.

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