Before you even think of approaching lenders or investors to finance your business, you need to know how to prepare properly so that you get a positive response. It should not happen that in your eagerness to start up the business, you make some hasty financing decisions that can only delay the prospects of starting the business.
You must have a solid business plan, which is the platform on which to build your fundraising campaign. A well-written business plan will increase your chances of making money. The business plan must be convincing so that investors and financiers find sufficient profit in it. Only if they see enough evidence that indicates good demand for the product or service and that customers would buy it at a price that allows you to make a profit will they show an interest in financing your business.
Factors That Improve Your Fund Prospects
- In addition to ensuring that your business will be profitable, raising money yourself as a personal startup investment shows that you take the business seriously. By holding a personal financial interest in the company, you are telling investors of your intention to do justice to the funds they provide. This would convince lenders and investors of your commitment to get it right.
- Investors are interested in high efficiency from investments. If you can assure investors of high returns and be able to deliver the goods (product or service) faster, it would increase your chances of making money. Choose a defined market of sufficient size with significant purchasing power that would ensure your profits.
- Choose a market that is large enough and with high growth potential, as investors would like that as returns are likely to be high. You must explain how to gain a competitive advantage over your competitors.
- Show that you have a grip on the quality of the product and the logistics with regard to the timely delivery of the product or service. Also emphasize the capabilities of the human resources you would use. You must demonstrate that they have the required skills and experience to provide quality goods or services.
- Provide accurate estimates of the money you will need to start up the business and avoid being vague. Provide solid forecasts based on realistic numbers that make sense to investors who want to assess how wise it is for them to invest.
The Intermittent Need for Funds
Meeting the above requirements will increase your chances of winning investors as you can see your ideas and dreams of starting the business come true. However, this should not make you complacent as the battle has just begun and you will regularly need extra cash to run your business.
No matter how well you finance the startup and budget to continue, you will likely face cash flow issues, which are part of any business. There will be situations where you may find it difficult to pay bills for inventory, cover payroll expenses, or be unable to take advantage of a business opportunity that requires extra cash.
To maintain a stable cash flow that sustains the business and ensures its growth, you need to provide funds at intervals. You can do this by using the money you earn from business like the brokers do by using real estate commission cash advance†
Switch to self-financing
Real estate agents rely on using the company’s earnings to put the money back into the business. They finance the business with the money they earn. Commissions are the sole source of income for real estate agents, mortgage brokers and some other professionals such as insurance agents and travel agents.
Real estate agents have to wait many weeks before they can cash in the commission until after the deal is closed. The earning cycle extends by the number of weeks it takes to complete the deal. Meanwhile, they need liquidity so that they can quickly invest money to ensure the smooth running of the business.
Instead of waiting for the commission money, they advance the commission payment by selling it to a company that buys it at a discount. Since they can get the money immediately, they use it for business so that the cash flow remains stable and smooth.
While self-financing is a good option to keep the business running smoothly, if you want to grow quickly, you need to tap outside sources for funds. It would strengthen your financial muscles so that you can take full advantage of the growth opportunities that come your way.
This brings us back to the basics discussed at the beginning of this article, which emphasizes the need to prepare properly to convince lenders and investors to take an interest in your business. Once you’ve established your investor credentials, financing should never be an issue.
Marina Thomas is an expert in the field of marketing and communication. She also acts as a content developer with years of experience. She helps clients with long-term wealth plans. She has previously covered an extensive range of topics in her roles, including corporate debt consolidation and start-ups.