In any economic climate, it is challenging to find the funds to set up a business. Many entrepreneurs fail because they don’t perform thorough research before venturing into business. It’s important to fully investigate the economic market of the area of business you are about to step foot in, as this helps to determine the degree of difficulty to finance the business. On the other hand, it’s also easy to let overanalyzing and overthinking stop you from taking the leap.
Any entrepreneur will tell you that securing startup funds can be the toughest part of starting your own business. As Inc. states, “Nothing is scarcer than cash (except maybe sleep) when you’re starting out.” While the competition for funds gradually increase each day, your chances of securing investors significantly slims. So, before writing an application for business financing, you need to prepare yourself. Below are helpful tips for financing your small business startup.
1. Have a detailed business plan.
A business blueprint is the foundation of every successful business, as it maps out the course of the enterprise for several years. Without proper business plans, investors will not see the value of investing in your business. Martin Zwilling, veteran startup mentor, says that “to investors, startups without business plans are just expensive hobbies.” According to Entrepreneur, “one of the quickest ways to kill your credibility and your startup is to offer a poorly written business plan, or none at all.”
If you want to secure sufficient startup funds from lenders, you must be able to show them a detailed business plan. It uncovers the opportunities you have identified in the market that will bring profits — if funded. Additionally, in the business plan, you should indicate measurable goals that will convince lenders to support your idea. Not sure where to start? Here are some templates to get you going.
2. Seek advice from experienced investors.
You should acquire financial advice from experienced investors in your locality. They will show you how they obtained funds to start their own organizations. Additionally, they will direct you to the right lending firms to get business loans at the lowest interest rates. Apart from advising you, expert investors can also offer you resources to start your business. Many successful and philanthropic business magnates are willing to fund viable ideas that are likely to bring profits (think Shark Tank).
3. Maintain a good credit score.
A good credit score allows you to enjoy numerous benefits. Banks will be more likely to provide you with enough money to start a business, as well as provide you with loans with better terms and lower interest rates.
If you have a bad credit score, you should repair it before approaching financial institutions for loans. Some concrete ways to steadily increase your credit score include simply applying for credit cards, making everyday purchases with them and paying them off immediately… and I mean immediately. A common misconception about credit cards is that you will have to pay interest on every single purchase that you make, but that’s not necessarily true. Typically you will only have to pay an interest rate on a credit card payment if you do not pay your bill on time. That’s why it is inherently important to pay off your bill right after you make a purchase using your credit card, because if you wait until later it becomes easier and easier to forget.
4. Network with the right people.
You’ve probably heard it before, networking with success-oriented individuals will enable you to significantly grow your business. Professional networking is healthy for all sorts of businesses and it can help you acquire the funds to start a new enterprise.
When you’ve done a solid amount of face-to-face networking, you can also take advantage of these networking skills online. You can use a crowdfunding site to raise money to start your business. Set a goal to raise a particular amount of money within a specific period and use the power of the crowd. The Freedom Journal, for example, raised $453k in 33 days on Kickstarter.
5. Make a budget and shop for financing.
A budget is the financial aspect of your business plan that should guide your new venture. Most of the time lenders demand a detailed budget before releasing funds to their clients. After making a budget, you should approach several financial institutions in your locality. Consider a lender that offers business loans at the lowest interests.
By implementing the above tips before you go out to find investors, you will be able to acquire sufficient money to fund your startup. The next step after raising the money is to hire competent employees who truly support your idea. Now it’s time to grease those elbows and raise some money.