What’s standing between you and starting your own business? If it’s a lack of money, relax. There are a number of reasonable start-up capital options available to aspiring entrepreneurs. The key is planning. Your financing strategy must make sense to both you and your prospective lender.
In just 60-seconds, we’ll show you how to build a sound financial foundation for your start-up business.
0:60 Identify Your Needs
Estimate what you will need to launch and sustain your business—equipment and supplies, inventory, office or manufacturing space, franchise fee, etc. Then, consider what portion you can reasonably provide from your own resources (e.g., savings, contributions from family or friends). Be careful. You don’t want to over or underestimate your needs, nor do you want to endanger your family’s financial security and relationships.
0:48 Look at the Options
Commercial banks are the most visible lenders to small businesses, offering a range of conventional loans, as well as Small Business Administration (SBA) guaranteed loans. You can also look to venture capital firms, commercial finance companies, partnerships, etc. Be sure to learn as much as you can about the evaluation criteria and payback requirements for each.
0:36 Build Your Case
Most lenders will require a business plan, a resume detailing your education and practical business experience, a credit history with references and specific loan documents. Develop your business plan with sections describing the nature and type of your business, available resources and how they will be used to meet specific goals, timelines, financial objectives, analysis of your competition and how your business will fit in the marketplace.
0:25 Fill in the Blanks
Lenders may also request cash flow projections that illustrate both the viability of your start-up and your ability to repay the loan. Remember that the data plan needs to be realistic and supported by facts to validate your estimates and projections. Don’t cut corners on research.
0:13 Practice your Pitch
Every request for start-up financing will involve some sort of presentation. Even if you’re comfortable in these situations, organize your thoughts and practice with people who will provide objective feedback. Fielding any and all types of questions ahead of time will build your confidence and prepare you for any issue that may arise.
0:03 Ask Questions…and More Questions
Talk to your potential lenders about their processes and loan expectations. Your local chapter of SCORE also has a wealth of resources and expert counselors to guide you through the steps of start-up financing.
Article courtesy of SCORE.