One of the most common reasons why people don’t start a business idea which they have is becasue they aren’t sure where to get financing and they aren’t sure whether or not they are going to be able to afford the business idea which they have. The truth of the matter, however, is that when it comes to getting financing, where there is a will, there most certainly is away.
We have Alex from Sertant Capital with us today, a company that focuses on ensuring that people are able to get funding for equipment within the business. Alex has worked in businesses financing all of his life and he is going to help us give you some tips on how to plan for getting some funding for your business.
No matter what your idea is if you truly believe in it and you think that you can run with this business and make it relatively successful then you have to get prepared and go out and grab the funding that is available to you, and here is what you should be doing in advance.
Funding Source
The first step will be to identify which type of funding is best for you and your business. There is a huge range of options such as angel investment, bank loans, personal loans, credit card usage or indeed using a specialized service that seeks to support certain businesses in helping them to get funding.
Each of these will have different amounts that you can borrow, different interest rates and in some cases, you may be giving away a percentage of the business in return for some funding. Before you go looking for money, you need to understand where is best to go. Write down the pros and cons of each and that write a list in priority order of which sources you will try.
Business Plan
It doesn’t matter which source you choose for your funding, if you do not walk into a meeting with a watertight business plan then you can kiss any chances of getting financial support goodbye. Lenders want to know how they will get their money back and that wants to see that you have done the work which indicates to them exactly how they will get that cash back. Your business plan should have a 5 year and 10-year projection and it should be based in fact. If you are in any doubt about valuations and forecasts then it is essential that you first speak to a financial expert to get this information and to help you to put together a business plan.
Spending Plan
Lenders don’t just want to know how you are going to get them their money back, they also want to know what you plan to do with their money once you have it. This is very rarely a pre-requisite for lending money but they will want to know what the business will be doing with this money and how that will help the business to succeed in the future.
Beyond what the lender wants and expects, you should know what you are going to do with this money too. When we talk about understanding how the money will be spent, we are talking detailed plans which account for every dollar and how it will be spent or invested.
Budget and Ceiling
It should go without saying that you should never borrow more than you can afford to repay but despite this, it is still something which a great many people do when they launch their own business. So desperate are they to get into a business that they take on way too much debt and assume that the business will be successful enough so that they will be able to afford it in the future.
Those who do this are the same people who massively overestimate their forecasts and they are also the people who go out of business and face financial ruin in a matter of years becasue of their poor planning and their naive approach.
Work out a sensible budget for your business and always err on the side of caution when it comes to committing how much money you think that you can repay in the future. In doing this you will at the very least be able to ensure that you will not have people knocking on your door in the future, asking for their money back.
Finance is easy to get, make sure that you have a watertight plan and that you are sensible in the money that you take. Above everything else just make sure that you hit your repayments on time, every time if you want to continue to get funding in the future and avoid issues that your business just doesn’t need.
