How to Finance Your Business

How to Finance Your Business

Starting a business requires seed money. There are businesses that need a huge amount of money to start, while others don’t. If you have enough money for the size of operations that you want, you can already start your business. However, not having enough money is no excuse for not starting a business that you know will click with your target market. There are many ways you can finance your business if your money is not enough. Here are some of the starting principles in financing your own business.

Create An Attractive Business Plan: Planning is very important in any endeavor, especially if it involves money. If you have a clear cut plan on how your product or service will be able to conquer the market, it will not be difficult for you to convince investors to put their money on your business. Your business plan is the first thing that investors will like to see. It will help them see if they could earn money from your project either on a short-term or a long-term basis. Even if you are using your own money to start your business, you still need a business plan.

Your business plan is the road map that will show how your business will navigate the first few years of its operations. This roadmap must include an analysis of your market, director profiles, management structures, operational figures, and financial figures. These components of your business plan will show your investors how your business will operate. After you have presented these things, you can now provide them the details of your product or service.

Request For Funding: After you have presented your business plan, you can now present your funding request. If you are selling your business to an investor, the roadmap of your proposed business is your sales pitch while your funding request is your closer. This funding request should include the way you will spend the money that you will receive. It will give your investors a clear picture of where you will spend their money.

In your funding request, do not overlook what most business proposals overlook: buyout plans and debts. If you include these two items in your request, your investors will know that you also have a business insight. Investors would like to see how you intend to pay your business debts in the short and the long term. They also would want to know what would happen if there’s a buyout of your business over a certain term.

Your Funding Options: You are lucky if you have all the money to spend for your business start-up. However, if you are like most people, you will need extra cash to fund your business. In this regard, you have basically two options to finance your business, a commercial bank or a private lender. There are other options but we will limit ourselves in this article to these two typical options.

Commercial Banks Commercial banks offer a variety of financial instruments that can help businessmen of various business sizes. However, their financing requirements are very stringent and the time they process applications usually takes months to approve. It is not unusual for them to turn down applications just like that. But if your application for financing is approved, a commercial bank will give you sufficient support and excellent service.

2. Private Lenders: Independent or private lenders are another option by which you can finance your business startup. Their primary advantage over commercial banks is that their lending requirements are more flexible. They are also less strict in their repayment terms. Their decision process is also much faster than the established banks since there’s not much red tape in their organizations.

When it comes to financial capabilities, they are not much different to commercial banks. Private lenders can also offer you the same amount of money for financing your business. Their rates of interest over the short term or long term are the same as well. But there’s one thing that differentiates them from commercial banks and this one is for your benefit: they can customize their financing depending on the situation of the business applicant. In other words, they can be more personal when dealing with your application for financing. With private lenders, there’s the element of human touch that is sadly missing in commercial banks.

There are many creative financing options available in the market today. But whatever option you decide to take, all of them definitely require the elements described in this article. You can’t ignore these elements if you want to get the perfect financing for your business.

Joshua Gruss is the CEO of Round Hill Music