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Financing for starting a company and getting your business off the ground

Setting up a new company and getting your business up and running almost invariably require capital. Your needs depend greatly on the type of business you are launching. 

Remember that if you are counting on your business as your only source of income, you must have enough capital for both your business operations and your personal expenses. It is also good to keep in mind that it may take a while before your new business is able to fund your salary.  

Create a detailed business plan

A detailed and carefully drawn up business plan gives you the best chance of getting external funding for your company. It proves to financing institutions and investors that you know the characteristics of your sector, business and market. 

You can find a template for a business plan and instructions how to create it from here. 

Business plan as a basis for growth

According to a study by the University of Washington in 2014, 64% of business owners with a business plan managed to grow their business. For business owners without a business plan, the corresponding number was 43%.

Phase 1: Prepare for the start of your business by creating a business plan

How to write a good business plan? 

Your business plan should be clear, well-thought-out and viable.

Budget preparation as part of your business plan.
Your budget should be realistic and state your fixed and variable expenses clearly. Outline three possible outcomes, ie scenarios: The worst-case scenario, the best-case scenario and an outcome between these two extremes.

See templates for drawing up a business plan and budget here.

How will your new business affect your personal finances?
Contact your banking adviser to discuss any security you may need for a corporate loan as well as the opportunities and risks that becoming an entrepreneur may present to your personal finances.

Keep your fixed costs in check
Keeping your fixed costs (such as salaries, rent and other agreed-upon costs) low will give you a better foundation on which to build your operations when your company is in its early stages. 

Phase 2: Find out your personal liabilities

Talk things through with us

When you are starting a business, it is important to take into consideration how it will affect your finances and how long it will take for you to get regular income. We, as a bank, must also investigate all parties involved in the process for risk management purposes before granting a loan.

As an entrepreneur, you will naturally be exposed to risks, too, as the decisions you make will inevitably affect your personal finances. When you are planning to launch a company, we recommend contacting our banking advisers as early as possible. 

How far are you willing to go?

Think about how much time and money you are prepared to invest to get your business off the ground. You should also consider what your family and friends think about your new venture.

How will you know if your business is successful?

Think about what you want to achieve in both the short term and the long term. Do you have specific financial goals? What does success look like to you? 

How much money are you willing to invest in your company?

When you apply for a loan, investment capital or other form of finance, we evaluate how much you are prepared to invest in your business yourself. In other words, do you have enough confidence in your business idea to invest a significant amount in your own business venture?

Phase 3: Choose the right form of finance for your business

You can get funding for your business in many different ways. Each form of finance has its pros and cons. Determining which solution is the right fit for you and your company depends on your sector, growth expectations, financial potential and your personal finances, for example. 

Different kinds of financing forms

Here you can read more about six different finance models. In general, the right finance model for you depends on the stage in the life cycle of your company. In the early stages, it may be relatively affordable for you to get your family, friends and colleagues to invest in your business. 

This may get you off to a good start, but more often than not your family, friends and colleagues do not have the capacity to fund more ambitious growth plans. At the other end of the scale, you have to give up both shareholding and control. But if you can get a professional investor to take an interest in your company, you will have better chances to boost sustained growth. 

Bank loans and credit
Public funding
Family, friends and colleagues
Crowdfunding
Professional investors
Payday/quick loans

Bank loans and credit

Banks (such as Nordea) and other financial institutions offer entrepreneurs a wide range of finance products, such as credit cards, credit accounts, corporate loans and leasing.  

Pros

  • You get to keep your shareholding and control over your business
  • You can keep the profits when your company begins to make money
  • Banks offer various forms of finance. We are here to help you find the most suitable solution for you.
Cons

  • The price of a corporate loan or credit is the interest and fees you pay
  • You must repay the loan
  • You need security for the loan. As an entrepreneur, it is likely that you will have to provide a personal guarantee, such as a mortgage on the home you own.

Public funding

There are many operators from which new entrepreneurs and startup companies can apply for a grant, a loan or a guarantee. 

Pros

  • This is a safe form of finance which does not usually come with heavy financial obligations
  • It inspires confidence and adds to your credibility in the eyes of other potential investors and partners 
  • Certain organisations, such as Finnvera, may also support you in other ways, such as providing you with a guarantee for a bank loan.
Cons

  • To be eligible for a grant, you must often meet and document several requirements
  • The application process can be complicated
  • In some cases, grants are only available to businesses in specific sectors
  • The costs and terms and conditions of public funding may differ greatly from those of a bank loan.

Family, friends and colleagues

You can borrow money from your personal network. You can, for instance, ask them to invest in your company and become your business partners.

Pros

  • These are the people who know you well and want to help you succeed
  • They do not necessarily expect high yields They also often give you a more flexible repayment schedule than financial institutions
  • Having friends and family invest in your company adds to your credibility when you apply for continued financing
Cons

  • Owing money to your friends and family can be difficult and put a strain on your personal relationships
  • Draw up a written agreement in which you lay down clear conditions so that everyone is on the same page. It is your best guarantee against any unwanted disputes

Crowdfunding

As the name suggests, crowdfunding means raising small amounts of money from a large number of private persons to fund your business. Crowdfunding can be based on donations, microloans or favors. To return the favor, you can offer people a chance to pre-order specific products or a stake in your company, for example. 

Pros

  • You get access to a large number of potential investors at the same time
  • Crowdfunding campaigns can be a great sounding board to test your business idea, and you can get valuable feedback and gain customers in an early stage
  • Crowdfunding is an effective way to build visibility and get attention for your business
Cons

  • Crowdfunding is becoming increasingly popular, which is why you need an attractive campaign to stand out
  • Dealing with many small-scale investors requires administrative resources
  • Crowdfunding campaigns often operate on an all-or-nothing basis: if you fail to reach your target, your entire venture might be at risk
  • Your reputation is at stake: if your business fails, it may also have an effect on your future crowdfunding campaigns and how people view your company as general 

Professional investors

There are many professional investors and financial institutions on the market, such as business angels and venture capital funds, which can invest in your business in exchange for a stake in your company.

Pros

  • You benefit from the extensive experience, large network and other resources of a professional investor
  • You have a better chance to develop and grow your business
  • Investment is not a loan that you have to pay back (the investor bears the risk)
Cons

  • Investors expect high returns and demand them of you
  • You are dealing with tough and experienced negotiators when negotiating equity stakes in your company, for example
  • You are giving up part of your company and profits
  • You might lose some of the control over your business and have to consider other opinions
  • New and inexperienced businesses may struggle to get financing from professional investors. Professional investors want to see signs of success and positive forecasts before investing.

Payday/quick loans

Quick loans or payday loans, as they are often called, are also part of the offering in the financial market. However, the interest rates and terms and conditions of payday loans are usually very unfavorable for the borrower, which is why we recommend you to familiarize yourself to the terms and conditions of the loan very carefully before taking one. 

Pros

  • Appear to be quick and easy
Cons

  • Extremely high interest rates

  • Rigid terms and conditions

Do you want to apply for a business loan?

Fill the application and we will contact you!

Apply here

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