The other side of managing your cash would be to understand the potential sources to fund or operate your business. Below is a list of potential sources.

Loans/debt financing

When considering debt financing, it is important to include all the sources of financing, the instrument (Loan, line of credit, Overdraft…) being used, and the terms of the instrument, such as the interest rate and portion of payment in interest, principal payments amount, the amortization period, and the term period.

Although it may cost you to borrow, it is still following the flow of cash into your business. See above to learn more about the various debt instruments.

Investors

Investors are private sources of funds, will likely take a stake in your business. They could be silent partners (in which they put-up money with the expectation of an agreed upon payment of dividends in the form of preferred shares) as well as active partners, who contribute not just capital but also their advice, and take an active role in the decision making. When it comes to investors, you will likely have to understand the various share classes you might have to create to payback or outline the ownership of the business.

Grants

Grants are another excellent source of funding, please see above for more information.

Personal investment

The most important part of the investment, as no funder will take your business seriously if you are unable to contribute some amount of personal capital or stake. As most people are unlikely to support a business unless the owner and operator is also willing to lose something if the project doesn’t take off. Some forms of personal investment can include direct cash or in-kind in the forms of investments, or collateral. Some will consider labour and time operating the business. It should be noted that a lot of investors would prefer something in the way of collateral or cash to be invested. Also, it is important to keep in mind that many investors, have certain requirements on the level of personal investment that is necessary. For example, many banks may require a minimum of 25% equity stake in the purchase of commercial properties, and that can be even higher depending on occupancy and riskiness of the investment.

Revenue from operations

The hopeful goal of inflows of cash are from the revenue that you can generate from sales of your products and services, as well as from other sources, such as licences for your intellectual property.

You should be able to make projections for your revenues from several approaches.

You could take a bottom-up approach and estimate your potential market share from the total potential market in your area and estimate your sales from that figure. Alternatively, you can utilize past data to estimate future sales. Or if you are good with statistics, you could use a statistical regression to estimate and create a model to predict your future sales. However, that approach can take a lot of time, effort and research to gather the necessary data. If you are stuck or curious to learn more, please book a consult with a Small Business Development Officer at the EC.