How can you finance the start-up phase?

Financing a business means obtaining enough capital to set up and run your business. Appropriate financing will help make the start-up period and the early days of your business easier for you, enabling you to meet your payment obligations.


The most common way to fund a start-up is through equity and loans. It is also possible to obtain external investors. These could be friends, family members or professional investors. In return, you could, for example, offer your investors shares in the business.

You could also raise capital through, for example, Crowdfunding (network financing by collecting money) if you have an idea that is interesting to the market. Public enterprises may offer relevant support schemes which you can apply for, subject to certain conditions.

What will I have to finance?

It is important that you determine how much capital you will need in order to finance the start-up phase. You determine this amount by creating an overview of your capital requirement (start-up costs). 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 income. Once you have calculated your capital requirements, you must look into financing.

Equity

Make sure you have enough equity to finance your business. The equity required in the start-up phase will depend on the risk you take and the industry you intend to start up in. However, it should be between 20-35% of your capital requirement. In addition to money and assets in property, equity can also be in the form of equipment. Please note that own equipment must be valued before it can be recognised as an asset in the business.

Your own input as equity

If you apply for support, you will normally be required to have some equity. The amount of equity that is required may vary between the various aid schemes. You can include your own input as part of the overall financing in your 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 input could be the work that you do relating to market research and product testing. This should be included in your financial statements.

Borrow money

If you need to borrow money to fund your start-up, you can apply to your bank or other financing institutions for a loan. You should be aware that lenders will require collateral for the loan, for example in the form of collateral in real property, stock or equipment. If you can offer good collateral, you will be able to secure better interest terms than with poor or insecure collateral (for example, inventory).

If you wish to borrow money from a bank, it is important that you thoroughly prepare for meetings and that you are able to present realistic budgets and show that there is demand for your project in the market. A carefully considered business model, along with your business plan and realistic start-up budgets, will provide a good starting point for your discussions with your bank.

Support schemes

Many public sector support schemes are available, which you can apply for funding from whether you are in the planning phase of your business or you are already under way. If you have an idea which represents something new and does not compete directly with anyone else, you could for example apply to Innovation Norway. You could also investigate whether your local authority has any municipal or local support schemes which you can apply to.

Own input

If you apply for support, 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 input 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 input could be your own work relating to market research and product testing, and must be included in the accounts.

Can you access financing from Innovation Norway? (in Norwegian only)

Crowdfunding

Crowdfunding is an alternative means of financing that enables you to finance the start-up of your project with contributions from multiple donors, including both private individuals and companies. This method can also provide you with good feedback about your idea or product.

What is crowdfunding?

Crowdfunding is a means of raising money for new projects. For example, you can raise money by financing the start-up of a new business or to create a prototype of a new product. The concept of crowdfunding makes it easier for people to provide direct support to projects that they care about, while making it easier for small players to obtain support for their projects. Funds are generally collected online.

There are different types of crowdfunding. The most common forms of crowdfunding are: 

  1. Donation, whereby you give an amount without anything in return.
  2. Reward, whereby you give an amount for a project and receive a reward.
  3. Equity-based, whereby the person who gives an amount receives shares and becomes an owner in the business.
  4. Loan-based, whereby someone lends money for a return from the project over a period of time. This is also known as crowdlending. Separate rules are drawn up for those who provide loans.
  5. Both donation and reward-based crowdfunding are applicable methods of financing the start-up of new businesses at an early phase. This makes it possible to obtain support from many people who want to give money without demanding anything in return.


Equity and loan-based crowdfunding are largely directed at those who want to invest in a project to achieve a good return over time.

The Financial Supervisory Authority of Norway has prepared clear rules for who is permitted to offer loan-based crowdfunding.

Financial Supervisory Authority of Norway - Guide to loan-based crowdfunding (in Norwegian only)

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