Financing of new companies - what should you know?

There are many important questions you should be able to answer before starting a business. How do I get funding for my business? What is my business plan and how do I draw up one? Read our tips on starting a business, creating a business plan and finding the right form of finance for you.

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

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
Cons
  • You get to keep your shareholding and control over your business
  • You can keep the profits when your company begins to make money

Tip: Banks offer various forms of finance. We are here to help you find the most suitable solution for you.

  • 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
Family, friends and colleagues
Crowdfunding
Professional investors
Payday/quick loans

Do you want to apply a business loan?

Fill the application and we will contact you!

Apply here

Liquidity & cash flow – what do they mean and why do they matter?

Liquidity and cash flow are not only essential parts of a business but also the industry terminology. In this article, we will tell you what they mean and why it is important to monitor them.