From redundancy to entrepreneurship Chris Locke, CEO of Rainmaking and Startupbootcamp ASPIRE (https://rainmaking.io/) Losing a…
When you’re opening your first business, finding the financing you need to begin and then expand operations can be one of the most stressful and challenging things of all. Happily though, these days there are multiple options to investigate when it comes to getting access to funds, and numerous ways to find the right choice for your needs. Read on for some tips you can follow today.
Be Clear About How Exactly You Will Use the Funds
For starters, before you even start talking to potential lenders, you should work out what want you want to use the funds for. The cash injection that you get will likely be limited, and will need to cover the essential things you need to do to get your business operational, not the unnecessary but “nice” extras on top. There are some things which must be done before a venture can open its doors, and others which can wait until later. You should work out which is which for your particular establishment sooner rather than later.
Keep in mind, too, that most banks and other lenders will want you to provide them with details about how you plan to spend money. They will want to see that your reasoning is sound when it comes to utilizing funds, and that what you want to do with the cash will get the results needed for you to be able to pay the loan on time, with interest, every time.
Put All Your Paperwork Together
Another thing you should do before you start approaching potential lenders is get all of your paperwork together. You probably won’t have any commercial trading or financial history available when you’re starting a new business, but will have other things that need to be provided to prove you are a safe enough risk to give cash to.
For instance, as a new entrepreneur, you will typically always have to make your personal financial accounts available, particularly if you are acting as a guarantor or using your own assets as collateral. You should have your last five years’ worth of tax returns all completed and up to date. All of this information will help lenders to see that you have a solid financial history and a good credit record.
Banks and other lenders will also usually not consider lending funds unless they have seen a comprehensive, up-to-date business plan. Your plan needs to show them that you have conducted the necessary research on both the industry you want to start your business in and your nearest competitors; and that you have thought about things such as the strengths, weaknesses, opportunities and threats for your new venture.
A good business plan will also include details on your prospective target customers; your mission and vision statement, and various goals; carefully-calculated sales and profit projections; and data on where you plan to “set up shop” and how this location is the best choice for your particular business model.
Examine the Different Types of Financing Available
Lastly, in order to find the right financing option for your new business, you must make sure that you closely examine the different types of funding available. While in years gone by most people could only turn to their local banks for a cash injection, today things are very different. There are lots of different lenders to choose from, and in fact traditional banks can sometimes be one of the hardest institutions to get a loan from when you’re starting out.
Conduct some research and you’ll soon see that on top of the bank you might have your personal accounts with, and all the other banks spread around the country, there are also funding options such as online alternative lenders; crowdfunding services (e.g., Indiegogo and Kickstarter); the Small Business Administration (SBA); lending firms which specialize in specific industries; and even family members and friends.
As well, don’t forget that there are different types of funds available too. You don’t have to just opt for a standard business loan. You might choose to utilize a line of credit for your venture, or even investigate the possibilities of selling part of the equity in your firm to investors in exchange for funding.
Once you have chosen the type of funding you want, and the style of lender you want to approach, it is time to carefully compare your options. Your research will show you that different companies often have very different rules and requirements, so some might not be a possibility for you at all, while others might suit your needs and current situation well.
Each firm can have a different turnaround time for loan approvals and fund dispersion too, with some giving access to money in just hours, and others taking weeks. It is important to think about all of these elements before you start applying for funding.