Starting a business with limited capital

Tuesday 23rd May 2023

If you’re in the process of drawing up a plan for your own business, then funding is likely to be one of your biggest concerns. And what do you do if you’re working with limited starting capital? Keep on reading to find out.

In this article:

  • Lowering costs
  • Securing more funding
  • Cash flow when you're up and running

Lowering costs

The first step in launching a business when your capital is limited is of course working out the most cost-effective route. If you can make your money go further, then you’ll have to rely less on funding options, which will of course need to be paid back.

Consider your business plan thoroughly. Are there any aspects of it that don’t perhaps stand up to financial scrutiny? Strip everything back to the bare bones that are required to make it work. You can always build yourself up later, but not if the launch fails from insufficient funds A slow start is better than one that never gets off the ground.

Of course, you do always need to be aware of the fact that you have to spend money to make money, as the saying goes. Don’t strip your plans too far back or you risk a lack of investment damaging your plans.

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Securing more funding

The more traditional funding options are the ones that will be most obvious as a source of securing funding, and they’re often a good choice if you decide that the capital you’ve got simply isn’t enough. All banks have their own business funding options, the most common of which is a standard business loan. These will be the first port of call for many start-ups, but be aware that your plan has to be good, and there can be a lot of rate variability.

The well-known funding options are however not your only route to financing a business launch. The web and social media have given us crowdfunding, which is a nice option for start-ups with an interesting idea that could capture the imagination of the general public. Alternatively, angel investors could be good for a pitch if you’re not sure about a normal loan from a bank or other lending institution.

Once you’re up and running

If money is tight, then you’ll undoubtedly find that cash flow is an issue once you’ve launched. This can be a problem for any business - not just start-ups - but if you’ve had to expend almost all the cash you have available on launching the business, then it’s likely that you’ll be running lean when it comes to overheads and other expenses. Thankfully, there are options to help you here too.

Clearly, reducing costs is your first port of call, but you can also call on the services of invoice finance providers if you’re selling to other businesses rather than directly to individuals. These agreements allow you to essentially borrow instantly against the value of invoices, which means that in practice, you have most of the value of an invoice as soon as you raise it. No waiting 30-60 days for payment. Services like factoring, which is a type of invoice finance, even mean you don’t have to deal with credit control, which could be great for keeping overheads and staffing costs low.

It’s always a good idea to take things slow too - if you don’t have a lot of capital to fall back on, then try to keep risk to a minimum. Build yourself up, and you’ll soon be able to take advantage of opportunities that come your way.

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