Getting Your New Business Funded
Obtaining funding to start your business can be a difficult process, but there are a few things you can do to increase your chances. Here are some tips:
* If you are seeking only a few hundred or a few thousand dollars, you should first look to friends and family and then to the banks. If you have assets to back it up (such as cash in your bank account, a house, or a car), you should be able to obtain a loan with relative ease.
* If you do not have an adequate credit history or assets to back up the loan, the bank may ask you to find someone (such as a parent or friend who does have adequate assets) to cosign the loan. Remember, the less risk the bank thinks it has, the greater the chance you have of being approved. If you have an existing account, a good credit history and credit score, and a relationship at a local bank, the process may not be any more complicated than meeting with a loan officer, discussing your plans, filling out a short form, and waiting a week for approval. However, if you have not established these relationships and history, now is a good time to start.
* If you are serious about raising more than a few thousand dollars of funding, you’ll need at least some form of business plan. The more funding you are trying to raise, the more professional and complete this plan will need to be. At its core, you’ll need to explain what you will be providing, what need or gap it fills in the marketplace, who you will be working with and who is on your team, your plan for making sales and marketing, and your financial projections including the time to breakeven. You may want to read some of the articles on developing a business plan on www.zeromillion.com for additional guidance or obtain a book on how to craft your plan.
* In general, you will be more successful obtaining financing if you have formed an entity (LLC or corporation) for your business. While it may still be possible to obtain a loan for your sole proprietorship, you will be taken more seriously and have many more avenues open to you as a corporation or other type of limited liability company.
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