You've made a firm decision to start your own business. You know what product or service you're going to offer. You know who your customers are, who your suppliers are and where you want to locate. You understand your business, you have the experience. You're all set to launch your dream.
Now What? Money to start and run your business, right? May be you have a little stashed away, or family, friends or relatives are going to help you get stated.
You will need to determine how much money you are going to need-and can you get it?
Do you know how & can you get the money-right now? If your business idea is sound, you have established a track record as a manager, and you have some collateral, then you have an excellent chance of obtaining theELOC's equity Lines of Credit, business financing or loans to get started. Even without collateral you may be able to get it.
Remember lenders and financial institutions offering loans and equity Lines of credit - ELOC's that you approach for loans want to lend you money, as long as you meet their requirements. Business loans for small to medium business may be the majority or only why they generate money from the interest you pay for their company.
They look at the individual or company as the potential borrower as a possible source of income for the lender. Professional lenders in general are very knowledgeable about financing. They know what their requirements are and how to determine quickly if you meet there requirements. If you don't know, the lenders will not lend you money. It's that simple.
Financing your business comes with planning and effort. You will need to research, organize your thoughts and plans before presenting your proposal for funding. Know the type of lender that might be right for you, and think about how to approach and present loan proposals to them. Have a clear plan, stay focused, present realistic financial numbers. Sure tell them the big $$$ opportunity, but keep it simple. Bankers want to see that you have a solid plan for building that big idea and revenues.
Note - Tell your friends and family how you are going to be the next Bill Gates or Donald Trump but not the lenders. They want to hear your excitement! ... Just be careful!!
Lender requirements for your business will involve: your personal credit reports, type of business, region, market for your product, your potential cash flow, collateral, etc.
Be prepared by making sure that your personal and financial assets match up with the requirements.
Do not be intimidated by the lender, he want the business; just make sure he is right for your business too. Ask questions about there lending policies and what they expect should they give you a loan. It is not always about the money after the fact.
For example, venture capitalists that lend you start-up money in return you find out they want a large part of the ownership, or a bank offers and aggressive interest rate that you do not feel comfortable with. Make sure the fit works both ways and you have a clear understanding or the terms and conditions of the loan arrangement.
If you do not feel comfortable or know how to prepare your business for funding, ask some one you know for assistance or hire an service provider that is experienced with preparing business financing, business equity lines of credit, aged corporate shelf companies etc to get you started quickly. They can save you a lot of time and rejections. It is worth the small investment to get your business started.
You will be surprised by the amount of knowledge that is needed to borrow successfully.
Lenders look for collateral to secure the loan in most cases, offer higher interest rates they charge, and the amount of control they place on your business during the term of the loan, etc. They have different objectives. Again ask questions? Some are looking for big returns. Others are content with a safe paycheck. Others may want a seat on your board.
Part 2 - Thinking through & preparing the financial plan for lending?
Have a great day & much success with your business!
Wm Cole Smith
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