Start Up Financing and the Importance of your Business Plan10:12 AM
Financing is a major concern for those who are starting up a small business, and with good reason. ...
Financing is a major concern for those who are starting up a small
business, and with good reason. Capital is a vital part of any new
business venture, and banks are tight fisted when it comes to small
business loans. Many an entrepreneur finds themselves scraping for
whatever startup funding they can find. Startup capital can be easier to
acquire, however, by following a few simple steps.
Three Must Haves for Your Startup
Credit:Before you can leave your present job and start a new business, it is really important to have your credit in order. Credit affects everything from the ability to get a loan to your ability to get the utilities turned on at an office. Good credit can mean lower insurance premiums and it can affect your ability to acquire a mobile contract for your company. What can you do if you have poor credit?
First you will have to find out what is wrong with your credit. Then you need to fix it. Sometimes that can require a helping hand and that’s one of the things that we are here to help you do. Don’t worry if a takes a few months to turn your credit around. Once you have past credit issues squared away, you are far more likely to be able to acquire the capital your business needs.
Debt:Don’t pile new business debts on top of old personal debts. Get those squared away first. Your debts won’t just disappear on their own. Not if you want to maintain your credit. Talk to your creditors and see if there is any way to pay them off. This is a part of why you can’t just quit a job to start up a new business. You need the steady income to take care of past debt. Investors and lenders will frown upon giving more money to someone who already owes money. The likelihood of a loan decreases to nil if you have no income on top of the debt. I can’t tell you how many clients want to borrow enough money to start up their business and clear their olds debts. The problem is that no investor or lender is going to be willing to do that.
Lenders:If you have impeccable credit, assets to be used as collateral, or real estate that can be refinanced, then you shouldn’t have a problem finding a lender. Lenders are a short term fix for business capital. Investors need to be your endgame. What will an investor be looking for in business?
Most investors want to see a product that already has a following. There are still a few gamblers out there, but not many. That means getting money from a lender to get your business to the point where it will catch the eye of an investor. There are over 500 Billionaires in the US alone so don’t worry, there is no shortage of people who can invest in your company. Just concentrate on building a business that gets recognition.
The Best Laid Plans…This is where a business plan comes into play. A strong business plan can help convince a lender who is on the fence about providing a loan to give your startup a shot. A poor business plan, on the other hand, may cause a lender to withhold a loan, even to someone with strong credit. So how do you formulate the business plan? Is it about minutiae and the providing of every little detail? Is a general business plan the better option?
Hopefully, your business plan will fall somewhere between the two extremes. No lender wants to see a 10 page paper on why they should support your business. First of all, they don’t have time to read it. Second of all, a long and detailed business plan stinks of a clever trick to try and con some capital for a business that may or may not pan out. If you can’t fit everything on 2 pages, you’re trying too hard.
At the same time, don’t generalize. When you talk about the industry, provide a few specific statistics to show how lucrative the industry is. When commenting on the qualifications of staff or administration, include relevant info about credentials such as schooling or work experience. When discussing how you foresee the business doing in the community, compare how similar businesses do in similar communities.