Your business plan should be able to guide you in this aspect, if it has been well thought out. A good business plan should tell you :
• Your initial expenses, fixtures & fittings etc.
• Your monthly operating expenses i.e. utilities, rent, payroll, etc.
• inventory and supplies to get started.
• equipment, IT systems etc.
Alternatives such as renting, leasing as opposed to purchasing should be explored.
– When do you need it?
Utilities, payroll and rentals are monthly expenses. Inventory can be built up gradually and suppliers often grant extended payment terms. These are points to take into consideration when phasing out your financing needs.
Collateral or security is what a lender has to fall back on if you are unable to repay your loan. It can be in the form of assets (business/personal) or in some cases even fixed deposit accounts.
You need to make sure that payments are well phased out according to your resource availability and that they do not stretch you beyond your capabilities. Good planning will be needed to balance your cash flow so that you do not run into financial difficulties.