Finding Financing for Your Startup Business

Written By: admin on March 9, 2010 No Comment

Starting your own business is exciting, but also often a little intimidating. Perhaps the most intimidating part is trying to acquire the financing you will need to successfully start your business. Most new businesses come with substantial startup costs, far more than what business owners can come up with out-of-pocket. Therefore, getting financed is one of the crucial steps to starting your own business.

Unfortunately, not every aspiring business owner is able to find financing. Lenders and investors tend to want to see first that the business — and its owner — has a good likelihood of success before they back it financially. Remember, a lender’s primary concern is making sure they’ll be able to get their money back again — as well as the interest accrued. If you can convince a lender of that, your chances of getting a startup business loan are pretty good.

Here are some tips for how to start your own business the right way — with sufficient funding.

Know the Industry

Experience in your business’s industry is extremely important. Lenders and investors will want to know your background in the industry, because if you know the industry well you have a much greater chance for success. If you don’t yet have experience in the industry, you should consider taking classes or working for a business similar to the one you want to start. You can also form a partnership with someone with the proper experience, form a Board of Directors to advise your company, or hire someone with the required experience as one of your top managers.

Clean Up Your Credit

Many startup business owners mistakenly assume that since they are financing a business, their personal credit does not come into play. Quite the opposite is true. Since your business is a startup, it has no track record, of either income or paying bills on time. As the sole proprietor, it will be up to you to qualify for — and guarantee — the loans your business is given.

In order to put your best food forward, it is important to start this process far in advance. Cleaning up your credit can take several weeks or months. You will need to first pull your credit report from each of the three credit reporting agencies, as major differences can exist between what each one reports — particularly if there are mistakes. Carefully go over each credit report, and contest mistakes with both the credit reporting agency and, if necessary, the creditor. Most credit bureaus offer online forms for disputes, which make cleaning up your credit report easier than ever.

Finally, if there are accurate but potentially negative items on your credit report, you may be able to negotiate with your creditors to remove the items — particularly if your track record with them is otherwise good. Taking these steps ensures that you will make the best possible impression when applying for a startup business loan.

Have Some Sort of Collateral

Just as you will need good personal credit in order to acquire financing for your business, you will also need to be able to provide some sort of collateral. If you are looking for a loan to help you start your own business, chances are you do not have any business property yet — although if you do, that would be the logical first choice. Without business property as collateral, however, you will need to use your personal property to guarantee the loan. Examples of property that could serve as collateral are your home or commercial real estate (minus what is still owed on the mortgage), a work truck or other heavy equipment, and office furnit

Write a Business Plan

While you are going through the lengthy process of cleaning up your credit is the perfect time to thoroughly research your business venture. Starting your own turnkey business is more than just getting a business loan and hanging up your shingle. You will need to know where the market stands right now, where it is projected to go, and how your business will fit in. You will also need to know who your target customers are, and how you will reach them. There are many different factors that play into how successful your business is, and you want to be sure to fully understand all of this before you get started.

Once you have done this research, you will put it together into a business plan. This is important because the business plan is how lenders and investors decide whether your startup business is worth funding. A well-researched, well-written business plan demonstrates that you know your market and therefore have a pretty good chance of starting a successful business.

Starting Your Own Business with the Proper Funding

One of the most important parts of launching a business is getting enough funding to start off on the right foot. Most startup businesses rack up considerable costs, and trying to cut corners on some of these can be disastrous to your business’s chances for success. Most small businesses fail within the first two years, usually as a result of insufficient funding and poor decision making along the way. Taking the time to find the proper funding for your business is imperative for not only supporting a successful launch, but also for making your business more likely to succeed.