Figures published by the British Bankers Association show that 50,000 new small business banking relationships were established in June and that lending to small businesses rose by £391m. Despite these uncertain times, many people believe that now is a good time to start and grow a business – and the fashion industry represents fertile ground.
Establishing a solid base is crucial to the long-term survival of a new business. It is paramount that start-ups have a plan that includes realistic targets, financials and timings. The plan should be reviewed regularly.
A major stumbling block for start-ups is securing sufficient funding. The Enterprise Finance Guarantee scheme (EFG) has received mixed reviews and our experience is that many entrepreneurs see little point in applying. However, under the EFG the Government will guarantee 75% of lending to viable businesses to ensure they secure sufficient working capital and investment.
The EFG scheme is open to businesses with an annual turnover of up to £25m, seeking loans of £1,000 to £1m, repayable over a period of up to 10 years. Significant funds have been earmarked for the scheme, but many entrepreneurs are unaware of it, while others are declined simply because they do not properly present their financial details to the banks.
Another funding option is external investment, although many entrepreneurs are understandably wary of giving up equity in their business. However, private investment can be a good alternative to bank finance.
There are clearly many challenges to overcome in setting up a business, particularly in an industry as competitive as fashion. However, realistic planning and hard work will help ensure you are not a passing fad.
- Natasha Frangos is a partner at chartered accountant and tax adviser Haysmacintyre