Taking Steps Toward Small Business Funding
Being an entrepreneur is an exciting moment of triumph. Your great idea and ingenuity are offering the world a new product and solving problems consumers didn’t even realize they had. You are seizing the moment to build your future and join a host of professionals who have helped to keep the American economy healthy. Before you let the head rush distract you, slow down and take a reality check. There are many challenges in the road of small business ownership, and several mundane tasks and unpleasantries that you can’t afford to ignore. One such unpleasantry is securing and maintaining stable financing for your startup and long-term growth.
Starting With the Right Idea
As you mull around your business idea in your head, consider how others will react to your plan. Even if you already have the finances needed to bankroll your company for several years, you will still need favorable opinions from others in the business world to sustain your growth efforts. You might find yourself needing a cash boost at times, but you will also need to develop vendor or partner relationships. Your consumers will also need to get behind your services or product, or your company will fail to generate revenue. If you want to convince individuals or other businesses to invest in your company, you need to have a well-designed business plan. Your paper document doesn’t need to be dozens of pages long, as you are doing this for your benefit first and foremost. Your business plan should articulate a description of the company, a market analysis, your product line or services, your design for organization and management, and your strategy for sales and marketing. You will need this type of document if you ever decide to attract investors or finance your business with another funding source. However, rather than swirling everything around in your head, your business plan puts your dream and ideas on paper and gives you the ability to work through different areas until a solid strategy is in place.
Taking Your Dream a Step Further
If you are like many entrepreneurs, you have passion, heart, and a can-do-spirit. However, your bank account and financial resources might be leaving you hanging with how to get your dream off the ground. If you need to rely on external funding sources, your business plan will be a key element of attracting attention. Before you meet with a traditional bank officer or private lender like Harry Stylli, you will need to be completely honest with yourself about the funding requirement for the next five years. You need to realize what financial support is absolutely critical to your company’s health and what your plans are to achieve those goals and repay any borrowed amounts. You also need to consider the terms of a loan or investment contract and be willing to sacrifice some of your personal investment if it means the company can succeed. Seeking financial assistance isn’t about what the money is going to do for your company in the present, but how it is going to be used to secure the future. This means your financial projections should be about hard data. Clear and realistic objectives are what need to be considered, not what you think might happen or what you want to happen.
Don’t Sweep Your Past Under the Rug
Your historical financial data is an important consideration of business funding, and without a strong credit rating and stellar financial performance for the past three to five years, you might not get the investment of capital you need. You can’t assume that your personal financial health won’t impact what you are trying to do with your business. Conventional loans will look at your personal credit history and score to help evaluate the potential risk you as an owner might bring to the business finances. If your business has assets, like vehicles, machinery, or buildings, you may be able to use those items as collateral in a financing situation. If you need to develop your business credit standing, you may want to consider opening a business line of credit or credit card to help create viable data for future financing. Treat your business credit better than your own.
Funding Options When Capital is Low
Needing additional funding is nothing to be ashamed of. There are times when you might need to purchase additional inventory or materials to fill an order or to meet a seasonal sales influx. You might need to upgrade some equipment or purchase a new warehouse, and you can’t afford to drain your capital reserves. Depending on how much money you need, your business can pursue traditional small business loans, equipment financing plans, lines of credit, factoring, or investment funding. If you do decide that additional funding can benefit your business, be responsible with how much you borrow and how the funds are used.