Ideas For Funding Your New Business
So, you have a great idea for a business but no money to start
it with? Getting funding for your business can seem impossible,
but if you really do have a good idea and a solid business plan
you may be able to find more people willing to invest in your
idea than you think.
One thing you must be willing to outline in detail is how you
intend to service the debt as well as how the potential investor
will benefit from your request. In addition, be prepared to do
your home work and have thorough market research, projected
costs and a detailed summary of how you intend to generate
income. This information needs to be projected for a period of
three to five years. It's a good idea to project your expenses
on the high side.
Have some idea of what you expect to pay your investor. The only
reason someone is going to lend you money is if they can see
decent profits in exchange for lending it to you. Your market
research had best substantiate that your plan is viable and will
provide them with sufficient return on investment to justify
their involvement.
Before you begin your search for investors, it's a good idea to
have an attorney and/or accountant take a look at your plan. Be
sure to use a qualified business attorney (not your family
lawyer). There are a lot of laws pertaining to how equity
capital can be raised from the public, and the laws change often
so you want to be sure to use someone who is up on this. Also, a
good professional may suggest specific points that you may have
overlooked.
Once you have all the paperwork and representation in order,
it's time to hit the streets and try to find someone who will
invest in your new company.
One thing you might try is getting some relatives to invest.
Yes, it can seem like begging, and it's a difficult thing to
have to swallow your pride. Surprisingly, in a recent survey,
almost 30% of entrepreneurs said that they raised all or part of
the capital they needed through family members. If this is your
choice, make sure that you have your attorney draw up a regular
business contract. When approaching family members, talk to them
about their investment the same way you would any other outside
investor. Tell them about how much money they can make, not
about how much you need their help. And make sure that you keep
to your end of the agreement.
You may have to tap into your own financial resources and drain
some of your savings or turn to your credit cards. This is the
most common way for entrepreneurs to raise needed business
capital. Before choosing this method however, talk with your
financial advisor. You want to look at the long-term
consequences of using your savings, life insurance or credit
cards, especially in the event that your business venture fails,
or does not bring in the projected return on investment (ROI).
If you do end up financing your project using credit cards, make
sure that you shop around first, and find the card that will
offer you the best rate and gives you the most "bang" for your
buck.
Use local business directories to find companies that
specialize in "investment services." You can approach a local
bank, but try and find a bank that specializes in industrial or
business type loans.
You might consider incorporating and selling stock in the
company. Although security laws in the U.S. have made it easier
for companies to go public, and offer stock as a way to raise
needed funds, this is still probably the most risky choice. It
is usually not a recommended option for very new or very small
companies. Because of the number of legal issues involved,
consulting with a knowledgeable attorney beforehand is vital.
There is also a lot of stress involved in running a public
company, and a considerable loss of autonomy and control. Before
making this choice, be absolutely sure that this is the wisest
course of action for your business.
When it comes to getting funding, it doesn't hurt to be
creative. If you believe in your idea, don't be afraid to do
what ever it takes to launch. There are plenty of ways to come
up with the capital you need. Think outside the box. Whether you
are looking for $500 or $500,000 the money is there you just
need to dig for it.