In today’s difficult economic time, a lot of potentially successful business ideas by aspiring entrepreneurs are either cancelled, put to hold or worst, never made possible not because they did not want to but because they never had a chance to secure funds to start their business. There are various ways for you to secure the necessary capital that your business you just have to think out of the box, prepare and do a lot of research if you are really determined to turn your business idea into reality.
While there are many sources of money for a small business, some are more accessible than others. Below is a list of 10 common sources of money:
1. Personal Savings
2. Release Equity in Your Home
3. Government Initiatives
4. Buying on Credit
6. Friends, Relatives and Business Associates
8. Other Commercial Lenders
9. Venture Capitalists
10. The Seller of an Existing Business
When you think you are ready to start your business, the key is to “keep an eye on your pennies’. What that means is before you get all hyped and spend huge sum of your hard earned money, understand that you will need time to learn if your business is viable or not as it can be a mistake to pour in too much money at the beginning. It is a fact that a number of small businesses have failed, because they raised and spent a pile of money for an untested business. This could be an entrepreneur’s nightmare especially if you are hooked up on borrowed funds. While engaging in business involves risks, there are ways you can minimize these risks by being wise. Even though some businesses require a great deal of cash, there are still a lot of ventures that do not. It would be better to consider about starting your business small and cheaply as possible. Think of it this way, that if your concept works, more funds will be available for you and if not, you can move on and take advantage of the lessons you’ve learned and you won’t be burdened with a ton of debts.
Also, a good way to plan for your business is to make an accurate business plan; a well-made business plan will be your prediction tool and will project your business from start up to even 3 to 5 years from now. A professionally made plan with clearly projected income and cash flow statements with the needed financial data’s such as furniture, fixtures, equipments, utilities, salary expenses, legal and professional fees, licenses and permits, taxes, rents, advertising, maintenance and repairs, accounting and all other expenses included could help convince and persuade investors, lenders, or any interested people that you have taken into consideration every detail of the costs of the business. Overall, the plan gives you a sense of security that you have the plan in your hands, you just have to execute the plan to make the business possible
When you already you have your plan, you now have to understand the various factors or keys for you to be able to acquire and secure funds not only to start but also the growth of your business. To make sure that you will be able to turn your business idea into reality, here are the 7 keys to Funding Your Own Business:
Character – Can you be investible or are you worth the investment? Do you give the impression you will make your plans a reality?. You have to make sure that you took everything into consideration, you have everything planned out and you will be reliable enough.
Ability – You may have the plan but not the money. But another factor that investors will look at is if you and your people have the right skills to make this plan possible. Are you experienced enough or do you have the potential to do what is stated in the plan?
Means – What are the business’s assets what and your own personal assets? You must particularly specify what assets are owned by the business as they can be used as collateral for your loans.
Purpose – You then have to specify what is the purpose of the loan? Is it for a sensible cash-generating plan? Few lenders will lend money to pay debts or to give yourself a nice pay rise.
Amount – How much will you need? Your business plan will show you a projected amount so that you will be able to identify the right amount of money needed. What funds will you put in to reduce the lender’s risk? Explain the business carefully, it is important to explain the risks, the threats and how you will be able to manage and reduce the risks for the business
Repayment – Prove you will be able to repay the money with a realistic cash flow forecast. Such as how much you will pay, either monthly, by quarter, semi-annually or annually. Identifying and calculating the costs or different payment methods will help you choose the right repayment method and also ensure great income for you & the business.
Insurance – Investors and lenders are wary of under-insured businesses. An uninsured loss could destroy you, your credibility and your ability to avail of future loans after all.
Understanding these factors and taking them well into consideration by preparing will give you a better chance at being able to secure funds not only for the start but for the future of your business. There are various ways to secure funds but always remember that it is advisable to start small from your personal savings, prove the model and then seek JV partnerships for growth and expansion. In business, an entrepreneur takes risks but a successful entrepreneur invests and risks wisely.