Preparing to start a new business requires that you secure funding. For many, self-funding is not an option, so creativity must come into play. It is important to have your business plan and financial earnings/profit projections ready to present to anyone that may potentially assist in financing your next business.
Investors often browse through crowdfunding websites to see what new businesses are seeking startup capital. When you start a campaign to finance your business, set a time goal and a monetary goal. In your description, include a link to a PDF version of your business plan.
Also, consider including a link to, or embed, a video introducing yourself. Crowdfunding efforts can produce multiple investors and can surpass the amount that you require when done correctly.
2. Venture Capitalist Investment
Venture capitalists have not been spending as much funding startups. The first quarter of 2016 showed that venture capitalists spent 25-percent less than the previous quarter. When you approach a venture capitalist with your business plan, it needs to be carefully detailed. They want to see what you expect your brand to earn its first year, and what you expect it to earn over 5 years.
You also need to explain why your specific idea will fill a gap in an industry or why it fills a specific need.
3. Provide Financial Projections
You need to work with a financial advisor to create a financial projection in terms of profits, earnings, and growth to any potential funding source. Only factual, hard data should be provided here. There are sections of your business plan to include goals and hopes for earnings when learning how to finance your business, only focus on numbers here.
4. Small Business Loan
You can consider applying with the Small Business Administration (SBA) for a loan. When doing so, keep in mind that your personal credit rating will be taken into consideration. Provide a copy of your financial projection and your business plan. Go over your presentation with your financial advisor to make sure that the data is correct, and then have it proofread by a finance expert. Taking the extra step helps ensure that your language is appropriate and is compelling.
5. Use ROBS
Before you resort to dipping into your savings to fund a business, consider using rollover as business startup (ROBS) options. If you have a 401(k), IRA, or retirement fund, you may be able to borrow from it to start your new business. If it is not a designated time for a withdrawal from one of these accounts, you may be subject to an early withdrawal penalty, so keep that in mind if you choose this option.
6. Consider Bootstrapping
Bootstrapping is quite similar to self-funding, except you are not using monies from continual earnings, you are taking from savings and available actual cash to fund your business. Scaling your business to account for the amount of actual cash you have available is a good idea. The benefit is growing at a controlled pace.
7. Connect with Local, Prominent Investors
When it comes to financing a startup in a niche-specific industry, connecting with local and prominent investors is ideal. Tech startups are trending, which means that funding is decreasing because there are so many to choose from. Take your unique idea and create a short video presentation, email it to local investors, and ask to schedule a meeting.
You need to gain the attention of big names when it comes to investors because a name alone can help your business start well. It is a good idea to compose a press release and announce your major source of funding to gain more industry and consumer buzz about your new venture.
8. Angel Investors
Angel investors are those that will lend you money without wanting anything to do with your business. They put their money behind your idea and promise to provide a return on investment (ROI), in a specific amount of time. While friends and family members are the most common angel investor resources, decide whether you want to risk those relationships if you should fail.
You should be putting funds aside each month toward repayment of any angel-invested money to protect your ability to repay as agreed.
If all else fails, start slow and keep your day job. You can use some of your earnings from your day job to take care of forming your new business over time. It also gives you more time to make sure your goals, products/services, and staff are ready for opening day. Make sure that your presentation is strong, without showing desperation.
About the Author
I am a regular writer for Forbes, Inc., Huffington Post, Entrepreneur Media (among others), as well as CEO and Chairman of Alumnify Inc. Proud alum from 500 Startups and The University of San Diego. Follow me on Twitter @ajalumnify