With all the talk on financial stability and economic awareness going on, great focus on the small businesses enterprises is coming up every day. Much of the financial and business awareness that is being created is in a bid to empower people to the extent possible, allowing them the chance to start and effectively manage their businesses.
The main challenge however is how to raise startup capital.
#1 Develop a solid plan for the business.
In as much as the individual may be clear on the kind of business they want to pursue, it is important that they first step towards securing funding be writing it out. A well-documented plan will paint a clear picture of what the investor or funder is buying into, allowing them to understand clearly what they money will be used for, as well as the structures and systems that will be set in place to realize the dream. This is one of the primary ways to attract investments.
#2 Have realistic business projections
When it comes to seeking funding, there are certain factors that investors look for. The entire principle behind setting up and running a business is making a profit. Any funder or investor wants to believe that they are putting their money in a viable and productive idea. The balance sheet needs to depict clearly what the sales, turnover and net profit of the business has been to date. In addition, there is need to have cash flow forecasts so as to give the financier an idea of what to expect from the business in days to come.
#3 Have Healthy Business practices
When people are setting up businesses, there may be a tendency to want to draw in customers and make sales at all costs. However, some costs are too high to incur, and one way this can be seen is in a business offering credit to customers before their payment trends are proven. In this way, a young business can set itself up for dark times as the risk of failed payments can scare away potential investors or possibly make those already plunged in to pull out.
#4 Try out online resources
There is an emerging trend in cyberspace that is proving effective and beneficial particularly to young and upcoming businesses. Peer to peer networks are some of the ways in which people are able to access funding for their businesses. This is done by connecting the lenders and the borrowers, who in turn interact and settle on a repayment plan that allows the young business to repay the loan as it were over a stipulated period.
#5 Charity does begin at home
In some ways, turning to family and friends may be a prudent move in soliciting for funds. One of the things that make this a better option to pursue is the fact that they, unlike other investors, may not only believe in the business but in the businessperson as well. This could prompt them to be more generous and lenient on repayments than any other investor may be. As such, this should actually be the first resort for anyone looking to start his or her business.
Crowd funding is another upcoming idea for those looking for investment for their businesses. It involves small businesses turning to a large number of investors for small amounts of investment. In exchange, the investor gets to own a part or stake in the business, more commonly referred to as equity. The danger with this idea is the fact that should the business person get too carried away, they may end up losing the greater part of their business to the investor, a move they might later regret.
Richard Horsewood a graduate from the Harvard School of Business, he is the head of consultancy at a financial aid firm that seeks to promote personal loan California, a program that educates the people of California on the channels they can use to acquire financial assistance for their investments.