Business finance needs

Every business needs money, whether it is about to open or has traded for years. Finance is needed for three broad purposes: covering the costs of getting started, paying the bills of running the business, and funding bigger spending that shapes its future.

Start-up costs

Before a business makes its first sale, money has to go out. A small escape-room business must rent and fit out a unit, build its rooms with locks, hidden doors and props, set up a booking website, buy insurance and advertise before it can take a single booking. These start-up costs arrive as a lump sum at the beginning, so a new owner often has to find a large amount at once.

Day-to-day running costs

Once trading, the business faces regular payments: wages for employees, rent, energy bills and payments to suppliers for stock. The costs that have to be paid whatever the level of sales, such as rent and insurance, are called overheads; wages and supplier payments rise and fall with how busy the business is. A small hardware shop, for example, must pay its supplier for paint and tools well before customers buy them. If the money is not there, the shelves stay empty and sales are lost.

Major investments for the future

Businesses also need larger sums, spent less often, to grow or improve. That could be opening a second workshop, taking on more staff, bringing out a new product or paying for research and development to test and improve designs. A firm making garden planters might spend months testing a weatherproof coating before launching a new range, and none of that spending brings money in straight away.