That’s why we’re here! Getting access to capital to start or grow your business doesn’t have to be daunting. Here are the top three things you should consider when looking for funding.
Prepare for the unknown
A business plan may direct where you want to go, but it’s cash flow that gets you there. To give your plan some fuel, create a financial plan as part of your annual business planning. By forecasting future financial situations, you can better prepare your leadership to manage cash flow and borrowing needs. And if you do end up needing more capital for your business, the financial plan assures potential capital providers that management planned for this.
Another factor determining whether or not your business qualifies for funding is its approximate value. There can often be quite a significant difference between what the owner perceives the value to be and how the potential lender sees it. It’s important that as a business owner, you see your business’ value as a lender would—from a liquidation perspective.
To get an unbiased evaluation of your business’ value, have a trusted third party give a realistic assessment. They’ll be able to see how both an owner and new capital provider would view the worth of your company.
Know your financing options and costs
At some point, most businesses will need new financing to support growth or address a cash flow gap. The cost of this capital can vary widely—from four percent to 60 percent. It’s important to know which form of capital may be the right fit for your business according to its needs and life stage, and what capital providers will expect in return for their investment. If you want the nitty-gritty details on these financing options, check out this handy guide.
Make a good first impression
When it comes to pitching to potential capital providers, you have one chance to win them over. So instill confidence by showing them that you have a thorough understanding of your business, market, and capital needs.
A lender will expect to see that a borrower is in a good position to repay a loan according to the terms, while an equity investor will expect to see how the investment will achieve the returns that the entrepreneur promises.
Here are a few things that you should bring to make a good first impression:
- A financing proposal that clearly and concisely presents a three to five year financial forecast and cash flow estimates for one to two years, current financing status, and the planned use of the proceeds.
- A complete business plan including market overview, business model, products/services, management team, operating plan and budget, and sales/marketing plan.
Looking for more information on starting a business? We’ve got you covered. Check our our Entrepreneur’s Guide—it’s full of guidance and resources to help you every step of the way.