Sufficient funds are vital for the going concern of status of a new business to ensure that the business will meet its obligations and will not have liquidity deficiencies.

You will have to identify and assess these capital needs and find the most suitable ways to financially support your business.


Unfortunately there is no universal method for assessing you initial start-up costs due to the fact that every business is different and has its own capital requirements at different various stages of development. Some people prefer to start with minimal capital, while others are more risk averse and they invest heavily to develop the business.

You should identify only the costs which are necessary to start your business and it is crucial to classify them into 3 different categories to gain an understanding of your cash outflow requirements:
  1. The initial set-up costs which will consists of the incorporation expenses, regulatory requirements, website costs and professional fees such legal and consulting expenses.
  2. The fixed overheads which related with the administration expenses of the business such as rent, salaries, insurance, utilities and the finance expenses such as loan interest expense and bank charges.
  3. The variable overheads which are associated with the cost of sales such as stock and direct labour and the selling and distribution expenses such as sales commissions, advertising and promotions.


Needless to say that in the business world cash is a king, consequently in order to develop a successful business you have to manage the cash liquidity of your business. One of the most effective and efficient ways to do that is by performing a cashflow analysis which presents the movement of funds in and out of your business.

Bear in mind this analysis combines estimated figures and is completely different from the cash flow statement which is part of the financial statements and is using the actual figures at the beginning of an accounting period versus the amount of cash as at the end of the relevant period.

It is noteworthy to mention that having a positive cashflow and sufficient liquidity to meet short-term liabilities does not necessary indicate that the company profitable and vice versa.

Additionally at this stage is essential to calculate the ‘contribution’ of your business, instead of the profit. Contribution is the difference between sales and variable overheads. If you estimate that contribution will be negative in the long term, it is recommended to abandon the development of your business.


This is the stage where you decide about your business’ capital structure and gearing levels.

The most common methods to finance your business are:
  1. The capital introduced by the owner and the investors
  2. The borrowed funds
  3. Convertible preference shares (in case of corporations)

Before doing so, you have to consider that having a business with high gearing ratio (Debt/Equity x 100) may reduce not only your profits because of the interest expense, but also your liquidity as a result of the loan instalments. Consequently, the financial position of your business in the long run may weaken and in such case, it will be even more difficult to attract investors and obtain additional financial assistance from third parties.

On the other hand, you can seek investors that will introduce capital to your business and avoid having high gearing levels, however this means that your will have to share a percentage of your profits and lose the controlling power of your business depending your agreement.

In order to overcome the above issues, a financial instrument was introduced called ‘hybrid securities’ which represent a combination of equity and debt such as convertible preference shares. These shares are usually given to investors who introduce capital to a business and they require a fixed rate of return (i.e. 8%) for a limited period (i.e. 5 years). On maturity the shares (equity) will be converted to loans (debt). To make things even better such instruments usually they don’t carry voting rights, so the business owner will not lose his controlling power.


The Republic of Cyprus and the European Union provide funding in the form of loans and grants for a variety of business types. These funding opportunities apply for different new or existing business, research and innovation, renewable energies and grants for the recruitment of personnel.

It is worthing to make a research and find out if any of these grants apply for your business. In case you don’t have the time or knowledge to make a research you can appoint a specialist to carry out a research on your behalf.

More information can be found on this page.