How to Develop a Funding Strategy for Existing Business
No shock here: one of the biggest challenges for entrepreneurs and small business owners is finding the necessary funds to start - and ultimately grow - their businesses. If you are reading this, you are probably looking right now.
· As a social entrepreneur for more than four decades, as well as an angel investor and venture capitalist, I have personally experienced the ups and downs of corporate finance and learned the hard way what investors look for before committing to finance. Over the years I have developed, and subsequently refined, some simple tips to guide other entrepreneurs through the fundraising process at all stages of the business lifecycle.
·
Bootstrapping: In the experimentation phase, use your own monetary resources, such as
cash from a savings account or careful use of personal credit cards. The wise
implementation of these precious dollars is crucial.
Friends and
family: if you don't have your savings or credit cards, or yes, but your
growing business needs additional funding, all is not lost. Think of inviting
family and friends to invest in the company with the understanding that their
money may not be returned. In most times, these contacts and family are
investing in you, not your business. Both parties should consider this
investment as an unconstrained grant. If the venture is successful, a reward
for these risk takers would be a nice gesture.
· Crowd funding: Let’s take the discussion of "friends and family" investments to a level or two. If you have not heard about crowd funding, you don't have to be very serious about financial support for your business or you've been living under a rock for the past six months. Crowd funding - allowed by the JOBS Act which will be launched on January 1 - allows for a larger pool of small investors with fewer restrictions and is ideal in the early stages of a business, especially if you don't qualify for a bank loan, don't you are ready for angel or venture capital financing (as described later in this article), or have no friends or family willing or able to provide the "no strings attached grant".
· Angel Investors: As your business reaches the next level of growth and you see stable income on the horizon, start getting closer to sophisticated "angel" investors if you need more funding. This affluent individual - or a group of individuals who pool their research and resources - provides capital to start a business, usually in exchange for convertible debt or equity.
· These groups of angels can be found in most communities and on the Internet, with a description of their purpose and goals. After performing due diligence, these groups will determine if your company meets their requirements, and if so, they will schedule a meeting to collect more data. Investments can range in huge number of dollars. At this phase of the business, angels turn into very real and serious investors and owners with high prospect looking for solid results. Bank loan / venture capital: In the later stages of a growing business, the now incorporated business may need a bank loan for various needs, including working capital and long-term growth. To secure this loan, financial institutions will require several years of financial information about both the company and the entrepreneur.
·
They want collateral to secure and secure a loan. To facilitate the
process, interact with the financial institution early on in the business, not
necessarily at the beginning for a loan, of course, but for a merchant account,
credit cards, and checking account. Over time, the bank will become familiar
with the business and the entrepreneur will be in a better position to seek out
additional banking products, including loans, when needed.
If you keep these five means of financing in mind
and develop a business plan that demonstrates the value of investing in your
business, you will significantly increase the chances of securing the capital
you need, whatever stage of the business you are in.
Comments
Post a Comment