Pathways To Learning... Since 2005
Hong Kong Registered School 566985

In-Person or Online

Course Finder

Article Library Banner



Question one and two – 1. Why? 2. How much?

hk moneyFrom both my personal experience, and working as a consultant for small businesses for many years, these two questions are the most important starting and ending point of the search for funds. It is not enough to only have a concept or idea. You must have a clear plan. People cannot help you achieve your goals if they are vague and lack detail. Do Not even bother starting to try to raise funds until you have clearly thought out and answered these questions.

The importance of a good business plan is absolutely essential as a starting point in raising funds. Its role is not just to convince others to lend or invest money in your venture. It is much more important than that.


rollWhat a good business plan does for you:

  • Brings clarity and detail to your ideas
  • Gives the idea depth
  • Helps focus all involved in exactly what the goals are
  • Reduces potential for future conflict
  • Gives a much more realistic base to the level of finance that is needed
  • Is a marketing point for potential lenders and investors
  • Helps reduce stress and uncertainty
  • Gives comfort and assurance

A good business plan is the single biggest challenge in raising funds. If you cannot produce this yourself than consider paying someone to help you. 

Producing a business plan is not really that difficult. If you start with a pro-forma paln from the internet and fill in the blanks you will come up with something pretty reasonable. The next step is to show people whose opinions you respect and incorporate constructive criticism. A respected mentor of mine once told me “The only person you do not want to be in business with is someone who knows everything.”

The financial plan is extremely important and if your knowledge of accounting is limited this may be an area that you should seek help on.

Remember you must be able to justify and support any and every aspect of your plan.

Also remember to THINK BIG - no one is interested in small.

Once the plan is completed
Now that you have a plan and know exactly what you want the next step is to find a source of funds. Before I speak about these I have a warning. I am sure you have all heard the story of Goldilocks and the three bears. The theme of this children’s story is about seeking what is just right, not too big, not too small. 

If you try to start your venture with the bare minimum of funds you are setting yourself up for stress and failure. Things will go wrong.

If you raise more funds than you need you are likely to overspend and therefore waste money. You may have to give up too much of future earnings or the business to get funds that just sit in a bank account. Wasted money can be hard to recover. Also staff, if they see things done in a wasteful and glamorous style, are likely to be much more demanding.

Only raise what you need. But be realistic about this and make sure you have enough for contingences.

Borrowing money or finding investors for a business
When considering how you should raise the necessary money for your business it is extremely important to start with a plan. Many new businesses fail because they are under-capitalised. It is easier to raise / borrow money at the start of your new business venture than when things begin to go wrong.

Your options for funds are:

  1. Put your own savings into the business
  2. Borrow funds
  3. Find investors for your business

Put your own savings into the business
The two sources of own funds are really savings or selling of unused or under used assets. I think it is very important to contribute some of your own funds as it helps to convince lenders/investors that you believe in the project. It also tends to make a project less risky if the portion of borrowed or outside funds is less.

Borrow funds
This, in my opinion, is the most difficult way to raise any significant level of money.

Personal loan – In Hong Kong even if you have a reasonably low level of income a personal loan of up to $200,000 is fairly easy to obtain from the bank. Just do not mention you want to borrow it for a business venture. It is, on the other hand, quite easy to get a loan to renovate your apartment or go on a holiday etc.

Credit cards – Not, in my opinion, the best way to raise funds as the interest rates are very high. But a very easy source of loan capital. YouTube was largely financed by the guys that set it up on credit cards.

Family – Very good if it is an option but I would recommend considering selling them part of the business venture rather than borrowing money from them.

SME Loan guarantee scheme – Excellent. The Hong Kong Government underwrites small loans usually up to HKD1,000,000 for start-ups and SMEs. If these are to cover the costs of fixed assets they are relatively easy to get and are essentially low-interest, guaranteed, hire-purchase agreements. These loans are also available for working capital although these are more difficult to obtain.

Business loan from bank – Forget it. (Unless you are a large well established business or are willing to put up personal collateral). Banks do not lend money to small businesses. Banks do not lend money for new ventures. If you want a loan from bank do not even mention business start up or new venture.

Find investors for your business
In my opinion this is a much better option than borrowing. Many people want the opportunity to get in on the ground floor of something new.

With a good plan and a good vision it is quite easy to generate interest from potential investors. Talk about your plan and vision to everyone and let it be known you are looking for potential investors. You will be amazed at how many people will want to talk to you about the possibility. My advice is to ask family first if you get on well with them. Two main reasons – they may be upset if you do not give them the opportunity and it makes drawing up shareholder agreements etc. so much easier.

Investing is now so much more open to so many more people that there are now a multitude of schemes designed to bring investors and business owners together. These are usually called "angel investor" schemes. For small businesses in Hong Kong you will generally find two key groups by investment value. The first group are those looking to invest up to one million HKD, the second are looking in the range of up to five million HKD. 

THE HARDEST PART – By far the most difficult aspect of working with an investor is deciding what share they will get and the level of say they will have in your business. A detailed and comprehensive shareholder agreement MUST be written up.

Good luck!

I have included a basic outline and format with suggestions about how to go about approaching lenders or investors and a basic outline of what should be included in a Business Plan.

If you are considering option two or three then the following is an outline of some of the steps you should take.

Planning your case

  • Your success will largely depend on a well thought out business plan and on your reputation.
  • The more comprehensive your plan the better your chances of getting an investor or loan for your business.
  • Prepare a background statement about your business, setting out objectives, ownership, assets, staffing, location, markets and services.
  • Persuade lenders/investors that their money will be safe. Show that it will be used to earn a good profit and you will be able to repay capital and interest or dividends on time.
  • Budget for contingencies. Produce evidence of the demand for your products and services. Market survey figures will help your case.  Include copies of your accounts for the last three years if available.
  • For new ventures prepare a feasibility study giving a cash flow analysis showing your predicted income and profit and loss figures.
  • Get reports to support your case from your accountant and other appropriate professionals.

Lenders or investors will look for:

  • Your assets so they can get their money back if things go wrong.
  • A commitment from you.
  • A realistic budget allowing for all possible contingencies.
  • Your ability to repay loans or dividends.

Information you should give the lender or investor:

  • The reasons for borrowing/raising the money.
  • The amount you need.
  • Your marketing plans.
  • Your pricing formula.
  • Your starting budget.
  • Your cash flow forecast for the next three years.
  • Your audited profit and loss and balance sheets for the last three years.

Preparing your business plan

A plan is absolutely essential. Not only will it help you raise the money you need but it  will help you to clarify your ideas and assess the project more objectively. Once you have your ideas on paper it will help you to raise money and permit you to monitor the project once you start.

  • If you are using your plan to raise money the document should be crisp, neat and free from errors, with an attractive cover.
  • It should contain all relevant names and addresses including those of your accountant, solicitor and bank.
  • It should be well set out, easy to ready and written in the third person.
  • Make a clear statement outlining the project and its objectives.
  • Include the reasons for wishing to raise / borrow the money.
  • Give the business history of the firm and the management. Include the date of incorporation (if a limited company) and the qualifications and experience of management and staff.
  • Give the company's financial position with audited figures for the last three years and the budgeted plans for the next three years.
  • Describe the product or services your business will be offering. Include photos if appropriate.
  • Summarise your market research. Give the size of the market. What competition is there? What advantages do you have over your competitors? The more accurate the figures the better.
  • How do you intend to advertise, promote and sell your product and services? .
  • Name your distributors, suppliers and subcontractors.
  • State the type of premises you have or require, with geogra­phical location.
  • List the equipment you have or need, and the age of your machinery.
  • Describe the vehicles you have or need for transport.
  • Do you need planning permission or a license to get started?

Make others sign a privacy agreement if you give the plan to them to look at and consider.

Predicting and monitoring results

There are three types of financial statements essential in business.

  • Profit and loss accounts
  • Cash flow forecasts
  • Balance sheets

You should seek advice from an accountant to help and advise you during their preparation.

1. Profit and loss account

This summarises your income and expenses over a set time and should include the following items:

  • Income from sales or services
  • Cost of goods or services sold (include the stock you had at the start less the stock at the end).
  • Gross profit or gross margin. (This is the difference between your sale profits and the cost of the goods or services.)
  • Operating expenses (include all your costs)
  • Profit before income taxe
  • Income taxe
  • Net profit (your actual profit or loss after paying tax).

2. Cash flow forecast

This is a summary of the money you expect to receive and pay out during a set time. Here is an example:

CASH FLOW FORECAST from............................ to .......................























































































































SUNDRIES and so on

























3. Balance sheet

This is a summary of assets, liabilities and your equity in the business at a specific date. It shows what the business is worth.

You can have a great plan and work very hard but if you can't get backing, if you can't get money when you need it, you can't get anywhere. 

Good Luck.

Prepared by Gary Hadler,
B.Ec, Dip.Ed, MBA. 
Director, ITS Education Asia
ph: 2116-3916
fax: 2116-1675
email: [email protected]

Dulwich College Singapore

Genius is one percent inspiration and ninety-nine percent perspiration.

Share Now!