By Neil Sowerby

Every new business needs money when starting up. The majority of businesses will need to buy equipment, establish the workplace and meet marketing. Then once you're established, you'll need cash to pay the bills and keep the business going. There is a range of financing options when starting a new business and choosing the right ones for your needs is essential. You can use your own money, borrow from banks, family and friends or attract outside investors. Grants and government support may also be available. A strong business plan will not only help you to lay out what financial resources are required, but will actually help you to raise the money you need. It can be used to explain your business to your bank and other potential sources of finance to convince them that it is worth risking their money by backing your business.

As you work through your business plan, you will be able to build up a fairly good idea of the level of capital you will need to cover your initial start-up costs, factoring in your running expenses.

Once you have an idea of how much money is needed, you can start to think about how you raise this finance. Many people use their own savings or personal borrowings to fund the business. However, if you have a strong network of family or friends, they may well back you – but, you should carefully consider the risk that they could lose their money if your business fails. You may also be able to borrow from a bank. Many businesses use overdrafts for day-to-day borrowing and loans to finance large purchases such as equipment.

A larger business with good prospects might attract outside investors. For example, 'business angels' typically invest £10,000 or more in exchange for a share in the business. Other possibilities include grants. Business Link has a useful online guide that helps businesses to understand the finance streams available to them. The organisation can help you to gain access to the North East England Investment Centre (NEEIC), which uses Government money to fund projects that will be of benefit to the economic landscape in the region. The NEEIC is accessed through Business Link’s expert advisers, who can also offer general advice, help and information to individuals and companies across the region, giving them access to the ‘business brains’ who will help to get their business idea off the ground, or grow their existing company. For further information about Business Link visit www.businesslink.gov.uk/northeast or call 0845 600 9 006.