smallbusiness.co.uk: Helping your business think big

Seven out of ten small businesses believe they do not need a business plan to successfully raise start-up finance, setting themselves up for disappointment according to Business Link for London.

A surprising 68 per cent of aspiring start-ups in the capital surveyed by Business Link for London believe a business plan is unnecessary when trying to obtain finance. The survey also showed 80 per cent of fundraising bids fail, many because of a lack of preparation.

Other findings include:

• 88 per cent believe the type of business idea would have no affect on a request for finance
• 91 per cent think experience in a industry is not a issue for investors
• One fifth will turn to friends and family to help raise funds if they are refused a bank loan, while just 12 per cent will go to another bank and only ten per cent will try another type of lender

’The problem for many [starting up] is turning their idea into a realistic business plan that financial institutions will invest in,’ comments David Sullivan, Financial Relationships Manager at Business Link for London. ‘As the survey shows, many do not know what they need to think about or where to start.’

Business Link for London offers the following advice:

• New businesses need to prepare a comprehensive business plan that answers questions about where the business is going and how funds will be invested.
• Having a good credit history is important when looking to borrow from a lender, however if you are not fortunate to have a good credit history it's important to advise lenders of your financial history and your commitment to repaying the loan.
• You need to ensure that you know how much is needed and for how long.
• The lender will be looking at the security of its investment, such as business assets or guarantees, so you need to consider this and include it in your plan.