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5 tips to properly finance your business creation project

properly finance your business creation project

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Depending on its characteristics, its ambition and your personal and professional situation, the financing of your business creation project will result from the combination of several sources of financing . But before embarking on your search, follow the advice.

Don’t underestimate your financial needs

Project leaders in the business creation phase often tend to underestimate their need to limit debt. Do not fall into this trap! Indeed, a good assessment of your investment and operating needs will have the following effect:

  • to secure the start of your activity by anticipating the cash flow gaps that you will inevitably encounter,
  • to give credibility to your file vis-à-vis a funder,
  • and thus facilitate obtaining financing.

Have you thought of everything?

  • to the investments to be made to produce, manage, communicate, sell …?
  • to stocks to be constituted?
  • to the security deposits to be paid?
  • the initial cash that will be necessary to meet the first expenses ( starting WCR ): rent, insurance, commercial actions, purchase of supplies, travel expenses, salaries, social charges, electricity …?
  • to the evolution of your WCR (working capital requirement) in the event of a forecast increase in your turnover ?
  • etc.

Take the time to understand a few essential concepts

  • Equity

In general, we identify by ” equity ” the capital available to your company. They are :

  • either provided by you (with the help of one or more relatives, if applicable : donations or equity investments) and your partners (if you are creating a company),
  • or by economic activity. In fact, during a boom period, if your business is making a profit, part of it will be kept in equity to be used in particular to finance investments. Your business will therefore have less recourse to debt and will be more resilient in the face of economic difficulties.

On the day of creation, equity is made up of starting capital: your personal savings, that of your associates, ARCE if you are a compensated job seeker, an honor loan , etc. They will allow you to:

  • face the first expenses necessary to launch your activity,
  • finance what is not through the banking system and in particular the WCR (working capital requirement),
  • and apply for a loan , because without equity it is very difficult to obtain a bank loan.

As a general rule, to apply for a bank loan, own funds must represent around 30% of financial needs , except in special cases.

  • The use of investors

If your equity is insufficient to start your business project (or later to relaunch or develop the activity) you have the possibility of strengthening them by calling on natural or legal persons ready to invest in the capital of your company. You can also collect donations from individuals on a crowdfunding or crowdfunding platform .

In business creation, the opening of capital to investors makes it possible to supply equity, to inflate capital and thus to claim larger loans.

In the case of startups with an ambitious growth project requiring significant investments, we speak of “fundraising”.

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