It’s a familiar scenario: You’ve decided to turn your epiphany-like business vision into a concrete venture. You’ve found a decent office space, forged numerous important contacts, and assembled a top-notch team. And then suddenly the euphoria diminishes sharply and reality strikes: What about resources to continually fund and sustain your enterprise?
Image courtesy of vichie81 | FreeDigitalPhotos.net
Financing can indeed make or break an ambitious startup and involves, more often than not, borrowing money from external sources. Help is, however, at hand. Simply follow the below tips for finding startup business loans, and funding will be a cinch:
1. Research your Domain Thoroughly
You should appreciate that banks and other lenders will treat your case with caution. After all, you have no previous business dealings and there is virtually no way for them to assess your creditworthiness and repayment abilities.
Therefore it is vital to examine and know your field of operation well. Have a definite business plan prepared detailing the nature of your products and services, your organization chart, existing capital assets as well as industry progress reports and trend charts. It would also be helpful to possess potential revenue figures along with cash flow projections and profit statements. All this will convince lenders of your vision and compel them to extend loans to you.
2. Have a Utilization Road-Map Ready
Lenders keep a close eye on borrowers’ fund usage – the former are as interested in the rapidity of repayments as they are in their amounts. Thus it is essential to present lenders with authentic fund utilization statements that outline anticipated expenses related to startup property, assets, vehicles, salaries, and working capital. It is also strongly suggested to include a chronology of the expected payments. These measures would assure lenders of your liquidity status and business prudence.
3. Possess Adequate Collateral
Lenders usually grant funds more freely when suitable collateral is provided. Hence ascertain that you deposit a fair amount of wealth comprising items like cash, bonds, vehicles, and buildings to garner a business loan. Be sure to attach a complete personal asset list to assuage the lenders of your credentials. Studies have shown that bankers prefer homeowners with owned assets rather than those with largely mortgaged holdings. Care, however, ought to be taken not to over-pledge the loan lest you should risk losing any asset.
4. Maintain an Impeccable Personal Record
You will be invariably asked to furnished personal tax and legal records to substantiate your borrowing. If you have defaulted on your taxes or have been indicted in any legal matter, lenders would be loath to extend business loans. Thus ensure that your personal dealings are as pristine and transparent as possible.
5. Explore Different Sources
Finally, banks and financial institutions are not the only external funding resources available; you also have the following avenues:
- Friends and family – They can prove immensely beneficial in raising sufficient business finances. Since they know you intimately, they are in a good position to evaluate your business potential and consequently invest money in your venture. They are also intelligent enough to treat their investment as a regular arms-length transaction.
- Business Associations – These organizations work closely with banks and venture capitalists to facilitate monetary assistance to startup firms; you would do well to approach them.