Do you have a great idea for a business? Before you can turn that idea into a revenue-producing machine, you’ll need to acquire some money. This capital can come from a variety of sources, but do you even know where to start? For a first time business owner, the complexities of financing can be difficult to master.
5 Tips That Will Help You Out
Every situation is different. Depending on the amount of money you have available, the connections you have, and how well you’re able to put together a deal, financing your business may prove to be relatively easy or particularly challenging. Here are some tips you may find helpful.
1. Consider Cash Flowing It
If you’re fortunate enough to be in a situation where you have the resources to fund your business without going into debt, this is always the best route. You might not have all of the cash on hand right now, but if you can at least cash flow your expenses from month to month, this is a fantastic option. Should the business flop, you can rest easy at night knowing you won’t owe anyone anything.
2. Conduct a Self-Audit
Most entrepreneurs can’t self-fund their own business, so they pursue traditional financing methods – such as a small business loan. If you fall into this category, it’s not a big deal. However, make sure you conduct a little self-audit prior to filling out applications and meeting with lenders.
When you apply for a loan, the lender will thoroughly vet you. They’ll want to know that you’re fiscally responsible and have a detailed plan. One particular area of interest is your credit score. As John Heath, Directing Attorney at Lexington Law notes, “A poor credit score can cripple your chances of getting a loan. If nothing else, it can saddle you with a terrible interest rate.” It’s best to take care of this in advance.
3. Think About Non-Traditional Options
If you’re unable to secure a small business loan – or you deem that a small business loan isn’t best for your situation – there are other options. Depending on the type of business you’re launching, how much you need, and what sort of additional resources you’re looking for, there are creative options available to you.
As Inc.com points out, you can try factoring, crowdfunding, angel investors, or even microloans. Don’t rule out any of these options until you’ve considered all of the pros and cons.
4. Tap Friends and Family
It can be a sensitive topic to broach with those close to you, but friends and family are often a wonderful source for capital. They’re much more apt to take a chance on you than someone who doesn’t know you. They may also lend money with much more favorable terms than you could find in the marketplace.
5. Become a Master of the Pitch
If you’re going to secure financing from someone, you have to become a master of the pitch. You need to be able to sell your business idea in less than a minute to anyone you meet on the street. If you can do this, you won’t have any trouble getting the ball rolling.
Proceed with Patience
At the end of the day, patience is the word you need to focus on. While it’s tempting to chase after money, regardless of where it comes from, you have to remember that the financial decisions you make now will have a lasting effect on the health of your business in the future.