Every business needs capital, beginning with enough money in the bank to pay for premises, business equipment and advertising.

“What must be taken into account here is the cost of your monthly rental, the equipment you can’t do without, and marketing/advertising,” says Andrew Maren, founder and CEO of capital fintech ProfitShare Partners.

“Once you’ve determined these setup costs, you’ll be in a better position to approach a bank or other financial institution with the precise amount you have, and what you need to borrow.”

Here’s what the experts suggest:

  • If possible, have at least six months’ worth of your expenditure in the bank. This means rent, salaries, debtors and any equipment you’re paying for monthly.
  • Look into renting a small space inside an office block or factory. Taking on huge premises from the start will often prove too costly for the return they give you. If your business is small enough, work from home if you can. Remember to take electricity and water into account, too.
  • Make sure you have the same number of months’ worth of having cash to pay staff wages and suppliers on time. Both are vitally important – unpaid staff will not only leave, but they will also spread the word that you didn’t pay them. Don’t underestimate the harm that can do to your reputation and ability to hire new staff who will trust you.
  • Look out for second-hand furniture to start out. If you need a decent boardroom table and chairs, look online for companies selling theirs. Do make sure you buy good seating for the staff who work on computers all day – you don’t want to deal with time off for back pain. Also, determine whether you should buy or lease equipment such as photocopy machines, desktop computers and laptops. There are also rent-to-own schemes where the cost is greater but over several months rather than all upfront.
  • Don’t forget to take into account the various software licences you will need to purchase – pirated software is illegal and fines can be exorbitant. Start off legal and stay that way. Check if your rent-to-own or hire purchase equipment comes with insurance. If not, get a broker in to evaluate what you’ll need to build into your monthly expenditure.
  • Insurance is another area where you don’t want to cut corners.

As Maren says: “As time goes by and you’re able to expand, don’t do it too quickly and run the risk of losing your original business and your new branch.

“Get expert advice on expansion – your finance provider is often well-placed to discuss economic volatility with you, and when the time would be best to expand.”

Enough capital to ensure you can provide your clients with the goods or services they request from you is vital, Maren asserts. “To determine the type of financial assistance you’re going to need, speak to various institutions and work out which one offers the terms that will enable you to get on your feet – and eventually, fly.”

Whether you qualify for a bank loan or are able to take advantage of purchase order finance such as that provided by ProfitShare Partners, there are different options for every requirement.

Says Maren: “There’s nothing I like more than to see an entrepreneur, start-up or SME succeed. Stay positive and ask people who have walked the path before you for advice. Make rational choices when you understand what you’re offered finance wise and never be afraid to ask more questions. Good luck. Our country needs innovators and those who answer when opportunity knocks.”