Wondering how to increase chances of securing funding for your small business?
Access to funding is the lifeblood of any business. And, with the increasingly tough, competitive process to get funding either from VCs, Angel investors, or even qualify for government grants it has become essential to set yourself apart from the pack to stand any chance.
It is a challenge for most companies out there to get hold of the funds themselves, especially in this present economic climate.
That is not to say that it is impossible; there are several things that you can do to improve your chances of securing funding for your business.
How to increase chances of securing funding for your small business
Here they are in no particular order:
You Need A Compelling Business Plan
One of the most critical factors that dictate the success or failure of any business is the business plan.
Lenders will want to find out whether or not you have an Iron-clad clear vision for the business as well as the reality of what can be achieved should you get your hands on the funding you seek.
This is why you need to ensure that your business plan is well laid out, with particular attention given to the executive summary.
This section in your business plan should logically highlight your vision in one to three pages, max.
If potential lenders are not convinced enough to lend you the money you seek, then they may not even bother to read the entire business plan.
That is to show you how important it is to ensure that your executive summary is in excellent shape at all times.
Detailed Financial Data
It is going to be counterproductive for you or your small business if you cut corners when setting out the financial position of your company and you end up getting caught.
Be as plain and as honest as you can; set out your accounts, balance sheet, bank statements, tax returns, cash flow information, etc.
All of these will help to assure prospective lenders that your business is fiscally stable and financially responsible, and therefore, a reasonable lending risk.
Understand the Kind of Financing You Need
There are a plethora of loans that are available for small businesses. However, it is super important to know precisely what you need.
Depending on your financial position, you should be able to answer these questions with clarity.
Which type of funding will work better for you? A secured or unsecured loan?
Do you have the necessary assets to act as collateral or would you be relying on your creditworthiness and word to be your bond?
How much time do you need to pay back the loan? Will a short-term loan cut it for you or do you need a longer repayment term?
Answering these questions would help you clarify what kind of funding you’d need; plus, all the requirements and paperwork you have to get ready before applying for the loan.
Reach Out to Local Banks and Credit Organizations
In most cases, smaller banks understand small businesses better as well as their pain points, making them more likely to lend money.
Keep in mind though, that these credit organizations and banks have specific business areas they are interested to invest in.
So, you may want to dig around a bit more to find those whose interests align with your business.
This way, it becomes a lot easier to get the financing you need when you approach them for funding.
Investing Your Own Money
By putting your own money into the business, you’re telling potential lenders and investors that you believe so much in your business idea that you’re willing to risk your private money to see it succeed.
Signing over valuable assets as collateral is another indicator to lenders that you know what you’re doing and possibly not going to mismanage the fund.
It’s also an indication that you are deeply vested in the business and willing to go any length as long as it is within your power to see the business thrive.
Meet with Multiple Lenders
It’s a numbers game. The more lenders and investors you pitch your idea; the higher your chance of scoring the funding you need from one of them.
So, you should not be afraid to approach as many lenders and investors as you possibly can; since as it turns out, not all of them will be willing to fund your business.
Pitching to different financiers opens the door to receiving different offers. Chances are you might even get an offer with some incredibly better terms you wouldn’t have otherwise.
Highlight How You’re Going to Pay Back the Money
Show the lender how you intend to pay back the money. Be as detailed as possible.
And, if you’re pitching to an investor, let them see, you have thought ahead about how they would get their money back; plus interest on their money.
Including an exit strategy makes your proposal even more appealing and increases your chances of getting funded.
So, there you have it. As you can see, these tips are quite simple and straightforward.
Create a detailed business plan that highlights your goals and how you intend to achieve them. Ensure your financials are clear with reasonable revenue estimates.
Be sure you understand exactly why you need the funding and communicate the same to the lenders.
Thoroughly research to understand how likely an investor is willing to put their money into your business and focus only on those with track records of investing in your kind of business or industry.
Invest your personal money; be willing to pitch to several lenders, and finally work an exit strategy into your proposal for your investors.
Follow these tips and you significantly increase your chances of securing the much-needed funding for your small business.