Financing to a company during the start-up phase
The start-up phase of a company involves investments, fixed costs and many kinds of other costs. You can make use of equity capital, liabilities or both to cover these costs. Please note that costs will already emerge before your business starts making profits. For advice on financing, contact the Enterprise Finland Telephone Service, for instance.
You need start-up investments and working capital at the start-up phase. Start-up investments help you get your company up and running. Working capital allows you to pay fixed costs and other ongoing charges. Please note that costs will already emerge before your business is making profits.
Investments include your company’s
- buildings, facilities and land
- machinery, equipment, software
- furniture and other movable property.
Please remember to also take into consideration the money needed for repairs, alterations and installations.
Fixed costs include
- the wages and salaries of staff (including indirect wage and salary costs)
- your own income
- facility rents and equipment leases.
Other costs related to business operations and launching a company include
- marketing, advertisement and other sales promotions
- electricity, heat, water, cleaning and other costs related to facilities
- books, magazines, training and membership fees
- allowances, and travel and entertainment expenses
- accounting and other services purchased from outside the company
- insurances and official charges.
The amount of money required for start-up investments and working capital is largely dependent on your company’s line of business and business idea.
The start-up investments of a small service company can even be very small. By contrast, a production company will often need expensive machines before it can start its operations.
A company should typically have working capital to cover the expenses for 2–3 months. For example, a one-person service company may require a few thousand euros. When a company employs a number of employees, it needs a lot more money.
Establishing a company is not expensive in itself. Becoming a light entrepreneur or a private entrepreneur working under your own name is free of charge. Other company forms require registration in the trade register. Depending on the company type, the registration fee is between slightly under one hundred euros to a couple hundred euros.
A certain amount of start-up capital must also be invested in a limited liability company, a co-operative company and a public stock company. However, this is not considered an expense as the capital can be used in the company’s operations.
Draw up a cash flow statement in connection with your company’s business plan. It includes calculations of how much money your company will need for start-up investments and working capital. By adding together your company’s investment and working capital calculations, you will find out the total amount of financing you will need at the start-up phase.
Find out how to get the money that you need. You can use both equity capital and liabilities for covering the expenses. Equity capital includes the money and assets invested by the owners, income from business activities, subsidies and equity investments. Liabilities include loans.
If necessary, you should consider whether you will be able to leave something out or do you really need everything right away. You should think about less expensive options, such as renting an expensive machine instead of buying it. You may also ask your customers for advance payments and try to move the due dates for your company’s payments.
For help in matters related to financing, contact the Enterprise Finland Telephone Service, your accountant, your region’s business development company, and ELY centres.
Apply for financing for your company from banks, finance companies, insurance companies and other financiers. If your company lacks the guarantees required by a bank, Finnvera’s partial guarantee can be a solution for arranging the financing. The bank can apply the guarantee for you from Finnvera.
ELY Centres grant development aid and industry-specific grants. If your company is located in a rural area, you can apply for an investment or start-up aid through an ELY Centre or a local Leader group. You can apply for an aid to support your company’s growth from Finnvera or Business Finland, for instance.
If necessary, make use of capital investors and business angels as both investors and experts. Also consider crowdfunding as an option based on your situation.
You may also apply for a personal start-up grant and a pay subsidy for hiring employees from a TE Office.