Money makes the world go round. Okay, maybe that isn’t entirely true. However, as someone who is trying to get their business off the ground or trying to take their business to the next level, money is your lifeblood. It’s likely that every company is going to need financial assistance when starting up but before you rush to just any bank, organization, or family member to hand over money, it’s important you think through some critical things first.
Know your options
There are a variety of financing options available for startups, which is great but can also be overwhelming. To get started on the right foot, you’ll want to ensure you explore all your possible options and determine what is best for you and your business. Financing options can range from a personal loan from family and friends to loans from organizations like Futurpreneur Canada or a bank. Take the time to understand what each financing option entails, interest rates, eligibility, etc. and determine what might be the best option for you and your business.
Have a plan
No one is going to want to loan or give you any money unless you have a plan. There are a few things you’ll want to consider. The first and foremost is your business plan. Having an idea is great but being able to show financiers that you have extensively thought through every aspect of your idea is critical. They want to see that you have done your research and have a viable business idea. If you’re struggling on where to start with your business plan, you can use the Futurpreneur interactive business plan writer for free which will walk you through each critical step.
Know your credit
The majority of lenders are going to look into your credit history before they move forward with any type of financing. Be prepared by pulling your credit report and being familiar with your own credit score. If your credit score isn’t in line with what lenders are looking for, there are ways to improve it but this will take time so you might want to start sooner rather than later. Remember, just because you may have a low credit score doesn’t mean you are doomed from receiving financing, it just means you’ll need to work on improving this before anything else.
Understand your numbers
On top of your business plan, you need to have a good grasp of your numbers. First having a cash flow is important which goes over your revenue projections along with your costs. Lenders want to know the metrics. They want to know what they are investing in will be generating revenue and that you’ll be able to pay back the money they are lending you. It’s also important to have a true understanding of the costs associated with starting your business. Do your research on equipment and operation cost: are there renovations you’ll need to make on your space in order to open for business? How much will hiring staff cost? All of these things need to be factored into your projections. This will also help you better understand how much money you need to ask for.
Financing is a critical component to turning your idea into a reality but you need to ensure that you aren’t just walking into a financier’s office with just an idea that hasn’t been properly and extensively thought through. So take some time working through the above things before you start asking for money.
Looking for financing options? Attend Business Link's free "BizConnection YYC Event: Financing Tips" on April 10 or "BizConnection YEG: Show Me the Money!" on April 25 to get more information on financing your small business.