A question I get asked all the time is ‘what are the alternatives for financing my business?’. The truth is, a lot of us don’t have enough money to grow our business. And we don’t know how much money we need to get started in our own business.
Committing your own money is often the best first step in financing your business.
It’s definitely the best indicator in showing your seriousness in your endeavor. Risking your own money gives other confidence in potentially investing their money in you.You can also consider family members or a partner for additional financing.The old saying tells us to “use other people’s money”. But to do that, you have to ask!
Banks are obviously a source of funding.
But remember, we have to not need money in order to get money from them. So, you need always need to manage your credit score and show profitability in your business. Leverage your business in order to get a loan from the bank.Other loan sources include commercial financing companies, Venture Capital firms, local development companies, or even borrowing from your life insurance.I built a whole business on my credit card when I first started my business. I didn’t have a loan, but I had credit, so I used it. If you have stock, you can sell some stock.
If you are looking to get a loan, the vendor will usually ask you 3 different questions.
Can you provide projected financial statements, a cohesive and clear business plan, and a clear description of your management team and its capabilities?
What amount do you need to borrow and how will you use it?
How will you repay the loan?
Be realistic in your projections. Don’t think you can pay it all back in a year or in a month. Play it out in your plan. Its important that you make sure repaying the loan in the priority when putting your projections together.
Want to know where these answers come from? Yep, your business plan!
You all know I’m a big advocate for business plans because it allows you to see and plan for the future before you jump in. Create your plan now so that you can feel confident in the amount it will cost you to build your business.
Here is what I’ve learned about business: You need twice as much money and twice as much time as you thought.
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