Are You an Entrepreneur?

If your chief aim in business is to provide a low-risk way of looking after your family or to establish a steady source of income, which you cannot find elsewhere, then you had better stick to the traditional methods of raising finance such as a bank overdraft or loan.

Your reason for being in business in the first place is the single most important factor in determining what type of finance is suitable.

If, on the other hand, you recognise the following characteristics in yourself, you may have the key entrepreneurial attributes that make your business suitable for raising venture capital (and see 'Venture Capital' below). Do you have:

-drive and energy

-the ability to learn from others

-the ability to respond to what the market wants

- tenacity and courage

-hunger for success

-self-confidence

-willingness to assess opportunities and to take a calculated risk

-the ability to motivate other people to work productively for you

-the ability to set high achievable goals

-the belief in your ability to control your own destiny

-a long-term view of where your business in going

- readiness to learn from your mistakes and setbacks -the ability to be competitive with good self-discipline.

Structures for business

Businesses are either unincorporated - like sole traders and partnerships - or they are incorporated limited companies. The distinction affects the way you can raise money:

- Unincorporated businesses: sole traders and partnerships are only able to raise additional capital from their own resources or by allowing new partners to buy into the business.

-Incorporated limited companies are able to raise equity by issuing shares. However, there are many constraints on this type of company - for example, you have to submit accounts to the Registrar of Companies and recognise the rights of shareholders.

Why do you need money?

This is not a daft question. In order to convince a lender that you are trustworthy, you will need to demonstrate that you have thought very carefully about how much money you require, for how long and for which aspects of your business. For example, do you need it to buy equipment or to pay for project development costs?

Funding facts

-The average cost of setting up in business is about £18,000. Typically one-third of this is funded externally.

-External funding is primarily used to finance business premises (29 per cent) and stock (21 per cent). It is rarely used for wages or recruitment.

-Banks are the main source of external finance for both start-up businesses (72 per cent) and established businesses (86 per cent). Friends and families are an important secondary source.

-Only one in five firms investigate whether they are eligible for government or EU grants.