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You are here: Home > Business > Business projects > Finance your business > Establish project costs and project funding

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Establish project costs and project funding

Both new and expanding businesses need money to fund their projects. Your business must get funding for each item it requires to operate: working capital, ongoing expenses, tools, equipment, buildings, patents, etc.

Once you've established your needs, you must determine what sources of funding are available to meet them. This information is often presented in a table showing how each need will be met.

Example

Project cost
Land and buildings $200,000
Renovations $50,000
Furniture and equipment $25,000
Vehicles $20,000
Inventory $17,500
Other start-up expenses (accounting, taxes and licenses, insurance, rent, supplies, etc.) $15,000
Total $327,500
Project funding
Contributed cash and assets (equity) $102,500
Mortgage $150,000
Equipment loan $55,000
Line of credit $20,000
Subsidies $0
Total $327,500

Funding your working capital

Determining how much working capital your business will need requires extensive research, reflection and planning.

Working capital is the amount of funds required to cover day-to-day operating expenses. The amount of working capital you need is influenced by your business cycle. It must be sure take into account:

  • Your suppliers' payment terms.
  • The time it takes to collect sales revenues.

The amount of working capital you'll need is also influenced by your company's development phase. Developing new markets and launching new products, for example, require major marketing efforts which will impact your business needs. Be sure to evaluate them carefully.

Conditional financing

Like some subsidies, some financing is conditional to obtaining other sources of financing. It's important to have a clear understanding of their interdependence when you draw up your project costs and project funding table. Will the project fall apart if a source of financing is withdrawn or refused by a partner? It's best to have a few alternative solutions on hand.

Before you draw up your funding plan, select the appropriate type of financing for your project.

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