3 Tips For Obtaining Small Business Funding
The dream of starting your own small business is exciting, but raising the money to actually do it is hard. You’ll find that costs add up quickly, and lenders may be reluctant to loan the requested amount of money. But people find ways all the time to start businesses; here are a few tips for your effort.
1. Create a Comprehensive Business Plan
You’re more likely to have success with a lender if they trust you have a sterling business plan. The plan should include an overview of your small business and product or service, projections for future growth, market research and analysis, and a description of your current and projected financial situation, along with a request for funding (among other sections).
Your requested amount of capital should be justified by preceding sections; in other words, a loan officer should both understand the reason you want a given amount of money, and why that amount if warranted.
2. Explore Various Funding Options
Many new entrepreneurs will first seek out a typical commercial loan from a bank or credit union. These are functional and attractive options — with good credit and (ideally) some business history, you may be able to get an attractive long-term loan with low interest rates.
SBA loans are another, similar option. These loans are partially backed by the government and are designed and come in several options; they usually will also offer favorable interest rates.
If you’re having trouble obtaining a conventional loan, there are always alternative lending options. A private funder or private investment group may be able to lend money — though interest rates will likely be higher than with a conventional loan. If you have significant property or other assets to borrow against, a hard-money loan may be able to get you startup cash.
3. Improve Your Personal Finances Beforehand
You may find yourself dismayed by what seem like expensive lending options, particularly if your own financial history is less than ideal. In that case, you might consider working to improve your personal finances before starting a business. Working to repay debts and tidy up your credit, for a period of a couple years or less, could make you much more attractive to potential lenders. In the meantime, you may even be able to start your business in a part-time or online capacity.
In short — getting your own financial situation in order, exploring varied funding options, and designing a great plan will all help foster the fiscal stability and proactive approach needed to fund and thrive in a new business.
