How strong is your management team?

How does your need for financing fit in with your business plan?

If you don't have a business plan, make writing one your first priority. All capital sources will want to see your business plan for start-up and growth of your business.

There are two types of financing: equity and debt financing. When looking for money, you must consider your company's debt-to-equity ratio - relation between pounds you've borrowed and pounds you've invested in your business. The more money owners have invested in their business, easier it is to attract financing.

If your firm has a high ratio of equity to debt, you should probably seek debt financing. However, if your company has a high proportion of debt to equity, experts advise that you should increase your ownership capital (equity investment) for additional funds. That way you won't be over-leveraged to point of jeopardizing your company's survival.

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Banks are one of most common sources of debt financing. There are many other sources for debt financing including: savings, loans and commercial finance companies. It is also possible to ask for funding from family members, friends or colleagues, especially when capital requirement is small.

Traditionally, banks have been major source of small business funding. Their principal role has been as a short-term lender offering demand loans, seasonal lines of credit, and single-purpose loans for machinery and equipment. Banks generally have been reluctant to offer long-term loans to small firms.

In addition to equity considerations, lenders commonly require borrower's personal guarantees in case of default. This ensures that borrower has a sufficient personal interest at stake to give paramount attention to business. For most borrowers this is a necessary evil.

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