Remember that if you expand your business there is a

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Unformatted text preview: on or a rise in interest rates. Remember that if you expand your business there is a risk of failure, as well as success, and the costs of failure, both financial and social, should be identified. 4 Sources of Venture Capital under £250,000 Control Increasing degree of loss of control Your attitude to taking a partner in your business and therefore giving up some control will strongly influence what type of finance you prefer. It is sometimes believed that a sale of equity is the chief way that a businessperson loses control of the business. However, you should recognise that whenever you let a third party finance your business, whether it is via debt, equity or any other form, they will be keen to see that their investment is properly looked after and will seek to influence the way you run your business. The chart below shows how the degree of outside influence changes according to the type of finance that is used: Own funds or improvement in controls Leasing or Hire Purchase Grants Bank Lending Sale of Equity Cost Clearly cost is an important consideration, perhaps the most important. Look out for the Annual Percentage Rates (APRs), as this is the best guide to enable you to assess how much the money is going to cost. Availability You may find that your choice of finance, at the end of the day, is determined more by what funds are available than what funds you believe to be most suitable. You will be lucky if you are actually able to choose. Characteristics Of An Entrepreneur Do you recognise the following characteristics in yourself? If so, you may have the key entrepreneurial attributes that may make your business suitable for raising venture capital. Drive and energy The ability to learn from others Responding to what the market wants Tenacity and courage Willingness to assess opportunities and to take calculated risks Good inter-personal and managerial skills to make other people work productively for you Set high achievable goals Belief in your ability to control your own destiny A long term view of where your business is going Readiness to learn from your mistakes and setbacks Competitive with good self-discipline Golden Rules There are no panaceas or golden rules to solve your financing problems. However, you should consider the following: never reject a request to invest in your business out of hand - at least discuss it never accept an investor without fully researching the implications of your decision never accept an investor with whom you do not feel you can work closely and get on with when the going gets tough raise sufficient cash to meet the cashflow needs of your business (realistically assessed), not just the investment needs - cash is the oil that lubricates your business; too little and it will break down; too much and it becomes wasteful and inefficient raising finance always takes longer than you expect - your investor needs time to get to know you and your strengths and weaknesses and vice versa. It is essential to leave enough time; you must start the process, not when you need the funds, but 4-7 months beforehand or even longer if you do not already have a business plan The Flowchart Now work through the flowchart below to decide whether you are: a proprietorial business for which venture capital is unlikely to be suitable, or an entrepreneurial business for which venture capital may be appropriate Hunger for success Self-confidence 5 Sources of Venture Capital under £250,000 WHAT FINANCE FOR...
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