Think you are prepared to start a business? The steps below can help you plan, prepare and find the best way to finance your startup business.
Step 1: Determine the legal structure of the business
First and foremost, you should decide on the type of business you want to set up. Will it be sole proprietorship, partnership, limited liability company, corporation, S corporation, nonprofit or cooperative? It is crucial to look for a business that will grow in today’s and tomorrow’s markets. Besides that, you should study the location of the particular business to ensure that the place is strategic for the business to operate.
Step 2: Write a business plan
Always make sure that you know what are your personal goals and motivations before starting a business. This is because it will help you to get through tough times during the business journey. You have to pay attention to every single detail and think through it. For example, how much fund do you have in hand to start the business and where to find the excess money required?
Step 3: Start-up requirements
The next step is to learn about permits, licenses, rules and regulations applicable to your type of business. Moreover, you have to find out the steps to establish a legal business entity and also the types of records to be kept for tax purposes. Determine on the types of recordkeeping and control systems for internal management is also an important factor to starting up a business.
Step 4: Find business assistance and training
You can start by writing down the names of at least five successful businesses in the chosen field. Analyze carefully what these five businesses have in common and make a list of reasons that make them successful. Attending classes on the subjects related to the business will also be helpful as it will provide you a better understanding for the business you want to run. The type of classes you can go for are, accounting, computing programming or business finance. Next, do not be afraid or shy to seek help and ask questions from the most successful people in the intended business.
Step 5: Finance your business
This step is one of the most important steps in starting a business. You have to decide on the best financial institution to borrow money from, how much you should borrow and if you are eligible to borrow the money. Always refer back to your business plan to make sure you are not drifted away from the original plan. You can find government backed loans, venture capital and research grants to help you get started. These are a few options you can opt from:
Malaysia government came out with many financing schemes to help SMEs to start or grow their business in these few years. The Graduate Entrepreneur Fund is a financial facility designed specifically for graduates. The objective of Graduate Entrepreneur Fund is intended to boost the amount of university graduates to enter the field of entrepreneurship. The participation bank is the SME bank. All Malaysian citizen who are not more than 40 years old and have graduated for not more than 15 years are eligible. The graduate should also hold a diploma that is recognized by MQA.
Financing with Debt
Financing a business with debt involves securing a loan. Borrowing a fund from family or friends is in the form of unsecured debt. Unsecured debt means that a loan taken without having to put up any specific form of security or collateral. Raising finance from family and friends may be easier for starters as they may accept more flexible terms and conditions that are better suited to your business than those offered by commercial banks.
Banks lend money to existing businesses but there may be some difficulties for a start-up. This is due to banks do not have any track record for start-up businesses. Banks require a sound business plan and must be persuaded by the viability of your business before they come to an agreement to lend you money. Most banks typically need collateral as security. However, OCBC bank offers a trouble-free application. This is because they do not require collateral, financial statements and also bank statements. OCBC bank offers attractive interest rates and also finance an amount from RM50,000 to RM400,000.
Equity financing is borrowing where the investor becomes a part-owner of the business in the process. This could be done through venture capital. With venture capital, companies can acquire large sums of capital that is not possible through bank loans or other conventional methods. Young Entrepreneurs Fund is used as venture capital funds and is handled by SME bank. The candidate must have at least hold a certificate qualification and aged between 18 to 30 years old. If the participant do not have a vocational certificate and want to apply for this scheme, they have to attend a training conducted by SME bank and obtain a certificate after completing the training to apply the scheme. The minimum financing limit is RM20,000 and maximum is RM100,000 and the interest rate is 5% per annum.
Step 6: Finalize all start-up requirements
Last but not least, you have to sign contracts and lease agreements. You should also apply for and obtain a business license. Then, you will begin to obtain utilities services and also start paying permits and fees. Lastly, you should open a business bank account.
In a business relationship, lenders will always ask for regular financial statements, which you should produce on time. Make sure that you constantly keep your lenders informed on your progress and any potentially adverse events. By following these 6 steps, you should be on the right track to starting your own business already. Good luck!