How can I finance my start-up phase?
Financing a business means obtaining enough capital to set up and run the business. Appropriate financing will help make the start-up period and the early period of the business easier for you.
Two ways of financing the start-up phase
There are two main ways in which you can finance the start-up of a business: equity and loans. In addition to money, equity could also be in the form of equipment. Your equipment must be valued before it can be recognised as an asset in the business.
What will I have to finance?
It is important to find out what and how much capital you will need to finance the start-up phase. You can calculate this amount by preparing an overview of your capital requirement. Here, you calculate what equipment you will need and your other start-up expenses and any operating capital in order to cover ongoing expenses during the period until you start to generate revenues.
How much can I borrow?
If you need to borrow money to finance the start-up of your business, the bank/lender will normally require you to have equity. Banks will normally require collateral for loans, e.g. in the form of a mortgage in real property. The loan amount and your collateral will determine what proportion of the financing must be equity. You should expect to need at least 20-25% in equity.
Can I apply to aid schemes?
In some cases, you can apply for aid for both the planning and the start-up of commercial activity. There are some exceptions, but there are a number of support schemes which you can apply for. If you have an idea which represents something new and does not compete directly with anyone else, your chances of receiving aid will be improved. You can apply for aid from Innovation Norway or industry organisations, for example.
If you apply for aid, you will normally be required to have some equity. The amount of equity that is required may vary between the various aid schemes. In order to obtain sufficient equity, you can include your own contribution as part of the total financing in the financing plan. This expense must correspond to time records you have kept multiplied by the specified hourly rate from those providing the aid. Your own contribution could be your own work relating to market evaluation and product testing, and must be included in the accounts.