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Many aspiring business owners halt or postpone their dream due to the sometimes misguided belief that the funds needed for startup cannot readily be raised! Of course it is indeed a challenge to raise funds, particularly for micro and small entrepreneurs who sometimes have a big dream and belief without a tried and tested product but one rejection is not a good enough reason for giving up!
What Lenders look for when handing out the dosh! - Solid Management skills – research has shown that one of the main reasons for a start up company failing is poor management skills
- A good product or good quality service – extremely important factor, the business must be in a position to provide a good or service to which there is a market, no one will lend you money in 2007 for floppy disks!
- Growth Prospects – will the company grow in the future, what are the owners’ plans is it new products, new markets?
- The Business plan- your map, your guide, this document should explain why you need the money, what are your plans for using the money given does it reflect a realistic cash flow?
- The ability to repay funds borrowed.
- The expertise and skills to adapt to changing conditions be it economical or financial
- Your current position.
According to Better Business Magazine, every lender looks at seven key areas before lending - Character – do you give the impression that you will make your plans a reality?
- Ability- do you and your people have the right skills and experience
- Means- what are the businesses and your own personal assets?
- Purpose- what is the purpose of the loan? Is it for a sensible cash generating plan? Few lenders will lend money to pay debts or give yourself a handsome pay rise
- Amount – ask for enough money but not for more than you need. What fund will you put in to reduce the lenders risk?
- Repayment – prove that you will be able to repay the amount borrowed with a sensible and realistic cash flow forecast
- Insurance- lenders are wary of under insured businesses, an uninsured loss could destroy you after all!
Follow these tips to ensure you raise the money you need for your business.
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once you know it is a goal of yours to build a business, from the start you should be looking at your credit. saving is one thing, investing is much more!