Starting a business is becoming increasingly easy. There are now lots of free resources out there to get you started and running. Unfortunately it’s not the same for accessing funds to keep you in business. One of the biggest challenges faced by startup founders is fundraising. There are just not many financing options for new businesses. And the likelihood of obtaining a loan from a financial institution is smaller than you can possibly imagine.
These are a few things you should be considering when it’s hard to get funds for your small business.
Do you really need a loan now?
The decision to opt for funding or bootstrap should not be taken lightly. One of the best ways to grow as a small business is to bootstrap from the beginning before you approach investors or any financial institution for assistance. That way you have leverage, you can negotiate better and your chances of securing the funds or loan will be higher.
It’s difficult to invest in just ideas with little to show for it. You can’t blame investors. Show a working prototype or the few customers who are already using your product and you will not struggle to convince investors to give you the opportunity to grow.
Once you have resolved to get financial assistance for your new business, it is important to know what you’re getting into before you take the money. How much do you really need? How long will it take you to request for another cash infusion? Businesses with good numbers about what they intend to use the money for and how it will last can put up a strong case for funds or a business loan.
Most banks want to see the numbers and the facts that supports your funding case. Get the financial numbers right. You can use a small business loan calculator to give you an idea of how much it will cost to take out a loan. Will a loan help your business now and in the future? Are you better off with a small amount or bigger amount of loan? You should be able to answer these questions whilst you prepare to approach investors.
You are more likely to be turned down by a bigger bank than a smaller one.
Traditional financial institutions are just not flexible and entrepreneurs know it. Banks like to lend to strong businesses which have sufficient assets. Few founders actually approach a bank for a small business loan because they know their chances are slim. Your chances of securing a loan from a smaller bank or entrepreneur-friendly local or regional bank is higher than a bigger bank that won’t take any risk in small businesses or entrepreneurs with no good track record or success in the past.
Some smaller financial institutions offer entrepreneurs personal, hands-on experience and they genuinely will help you through your entrepreneurship journey. If you do your homework well and your business plan is convincing enough, you will get the opportunity to explain why your business is worth the investment.
When you get the chance to present your business, don’t just talk about your product but show the problem it solves and value your customers will get from it. Will you still be relevant in five or ten years? Can you prove it? What shows you are the right person or team to solve that particular problem?
There are alternatives. How about online loan lenders?
The funding landscape is quickly changing with all the new online term loan lenders like FundingCircle, LendingClub, Dealstruck and Fundation. Greater percentage of new businesses fail and online lenders are also as much careful as traditional banks. You still have to prove the viability of your new business when you approach online lenders.
The good thing is that, there are options out there for you. In recent years, you can also use crowdfunding sites like Kickstarter, Indiegogo or Kiva Zip to get your company off the ground. Find out what will work best for your business and partner with lenders or financial institutions that can give you more than just a loan but can promise to help you grow as a business.
Yes, you can get that business loan.
If you want to launch, expand, or help finance your business, you have to get the basics right. Your business plan and financial documents are crucial. Get them right. You should also put your personal finance in order. Your past credit performance can be a problem. And more importantly, don’t wait till you need funding. Don’t wait till you hit a cash crunch before seeking financial assistance. Nobody will lend to a business at risk of going bankrupt or ceasing operations.
Starting a business is hard, nobody lends to startups.Investors shy away from most businesses. You will have to go through lots of processes to get a loan, angel capital, seed capital, venture capital etc. to create a sustainable high-growth business. Your chances of securing a loan or getting funding are pretty low but if you are doing something significant, there are lenders or angels out there who will listen and offer assistance. Don’t give up just yet.