Starting a new business can be costly. If you're looking for funding sources for your new startup, you're not alone. Many entrepreneurs need to find, earn or borrow money for their new businesses. So, we've put together this comprehensive list of funding for NZ start up businesses to get you started.
Financially it makes sense to pay cash when starting your business. Having no debt right from the start puts you in the ideal position. However, this is not always possible, making many entrepreneurs look for funding sources.
Your funding options in NZ for starting a new business are:
We'll look at each one individually, giving their pros, cons and how to obtain each one. We also suggest that you chat with an accountant or financial adviser before making any decisions about which one to go with.
Self financing is what it says; you pay for everything yourself. This can come from your savings, using your credit cards, taking out a personal loan or increasing your mortgage. The pros of doing this are that you remain 100% in control of your business, and can decide where the money is spent. The cons include wiping out your savings and increasing your personal debt levels.
To obtain a personal loan or release equity in your home, you will need to talk with a mortgage broker or your bank.
For a business loan, you need to have a business plan to show the lender. You can expect the lender to examine your financial forecasts, the specific things you need the loan for and their costs, an executive summary which outlines your business objectives, how the loan will help your business to grow and most probably your personal finances too. It is highly likely that to obtain a business loan that you will need to use your personal assets as security.
You will need to choose the right type of loan for you, such as a fixed or floating rate, and select the lowest interest rate levels you can.
The pros of applying for a business loan are that it is money usually given in a lump sum and a straightforward application process. The cons include giving your personal assets as security and having to pay the loan back with interest.
Finding and applying for business grants in NZ should not cost you any money! Beware of websites or people who say you must pay a fee, as that is not the case. You can learn more about common scams on the Commerce Commission website.
There are a few main grants you can apply for assistance in NZ when starting a new business. They include:
The pros of applying for business grants are that it doesn't cost anything and that you don't need to give up a share in your business. The cons include the work and effort required to apply for the grants, and you may still not get one.
Investors can bring your start up business much needed funds.There are two types of investors:
The pros of using investors are that they are a wealth of information as well as capital. The cons are that you may need to do some things their way, and not own your business outright anymore.
Crowdfunding continues to be a popular way of financing a new business. On the crowdfunding website, you set up a page stating what your idea is, how it will work, what investors will receive from it and how much money you want. Beware that as you are sharing your business ideas, someone may just copy you.
The pros of crowdfunding include that it is easy to set up, and you can reach a wide audience. The cons include that you have plenty of competition for funding and people can copy your ideas.
Business incubators are teams of business experts who focus on helping new business owners. Rather than give you money, they tend to help you find funding opportunities you can apply for. Business mentors and support services are usually included in the assistance they provide.
The pros of business incubators include access to the people who can help grow your business, plus find you funding opportunities. The cons include no guaranteed cash, plus possibly having to follow advice given by others.
For additional business help and advice, we suggest visiting our regularly updated business article section; it's a wealth of free business advice!
Posted: Monday 22 July 2019