Small Business

It is also very important to consider including an allowance or "float" as working capital for the early stages where you may not necessarily be generating enough revenue to cover all your costs.

When starting a business, one of the first and most critical points to address is identifying all the potential costs you will face. These include both the start-up costs and the ongoing costs.

Start-up costs are the initial outlays when setting up your business. These are one-off costs that occur before your business begins trading. Typical start-up costs include shop fit-outs, factory and office setup, equipment and machinery purchases, office supplies, business and other registrations, licence and permit fees, along with any legal costs.

Ongoing costs

are the recurring costs necessary to run and maintain the business. These costs include items such as wages and on-costs, mortgage/rent, electricity expenses, insurance and advertising costs.

Once you have obtained this information, you will be able to prepare a detailed budget that covers the start-up costs, ongoing costs and initial working capital requirements so you can calculate your overall financing requirements.

To assist you in determining your total finance requirements, you can download a start-up cost calculator at finance.gov.au.

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Financial Plan

Q1.Develop a realistic start-up budget for your business. You may wish to use a start-up cost calculator. Give answer

Sources of Finance

There are various sources of finance, each with their own benefits and costs. It is important to carefully evaluate your specific requirements and determine which sources of finance are best suited needs of your business.

Typical sources of finance include:

Personal savings

Credit cards

Friends and relatives

Angel Investors

Leases

Bank Loans

Based on a review of your financing needs and the various costs and benefits of different

sources available, you can determine from which source to seek your finance.

Financing the start-up of a business yourself by using your personal savings, taking out an equity loan on your home or through credit cards is usually the easiest and sometimes the cheapest financing option. However investing your own funds involves a level of personal risk that you need to carefully consider.

Obtaining finance from friends and relatives also presents a cheap and flexible alternative. However, it is important to remember that involving friends and relatives as investors can get complicated and end up affecting your relationship with them.

Business angel investors provide financing in return for an equity stake or a share in your business. Selling equity in your business generally triggers various legal, taxation and accounting consequences^[1], so you may wish to seek professional advice before accepting financing from an investor.

Leasing involves a financier purchasing the equipment that you require and then leasing it to you in return for regular rental payments for the duration of the lease term. At the completion of the lease term, you are offered the option of purchasing the equipment at an agreed residual value.

Bank loans are the most common source of funding for a small business. Examples of bank loans include:

Term loans: A loan paid back over an agreed period (term) where principal and interest are paid off in monthly repayments.[2]

Mortgages: used to finance the purchase of land and buildings. It is generally repaid by regular instalments including principal and interest.

Bank overdrafts: borrowing up to a certain amount from your bank when the need arises, allowing for flexibility and convenience.

^{NSW Small Business}

Build your marketing plan

Financial Plan

Q1.Assess the various sources of financing available for starting up your business. Give answer

Grants and Assistance

Grants and other funding programs are available from the federal, state and territory governments and in some cases from local councils. Generally there are no grants available for starting a business, however, there are grants and other assistance available activities such as expanding your business, training, research and development, innovation and exporting[1].

For information on available government funding programs visit:

Business.gov.au - Information on federal and state government grants and assistance.

GrantsLINK - Department of Infrastructure, Transport, Regional Development and Local Government; for federal, state and local government grants and funding programs available for individuals, businesses and communities.

Connecting NSW - Business Programs and Grants, provides links to information on various government grants.

NSW Small Business - NSW Department of Regional and State Development, for information on NSW government initiatives.

Innovation.gov.au - Department of Innovation, Industry, Science and Research, for information on federal government initiatives.

Applying for Finance