Action steps to acquire financing

The success of your business depends upon your ability to secure financing for your business. When you initially startup your business, acquiring financing can be one of the hardest things to do as your personal credit rating and the collateral you have to front for the loan can make or break your startup.

When it comes to financing your business, you need to know where to look. There are a number of lenders out there, but not all of them will help you gain the money you need in order to start a successful business. Convincing a lender to take a risk on a small business is an incredible challenge now as many lenders are hesitant to offer financing based on the recession and the fallout of many small businesses.

To acquire financing, you need to prepare the following:
1. Create a list of all the things you need to purchase and how much money you will need total in order to start or grow your business.
2. Provide detailed information about your products or services and your target market. As lenders see that you have a solid target market, it will be easier for them to offer you financing.
3. Show the lender how you plan to repay the money and how long it will take you to repay the money.

Acquiring financing comes down to your personal financial situation as well. Since small businesses are generally tied to the business owner in the beginning, you must be able to show lenders that you have had no problems managing your personal finances. This will show with a higher credit score of about 750 or higher. Your overall debt should be low and the balances on your credit cards need to be below 30% of the total limit in order to show lenders you do not abuse the financing that is offered to you. Small business owners tend to run their business finances the same way they run their personal finances which is why you will see a lot of lenders base the majority of their opinion on your personal credit.

Prepare a business plan. With the three tips above you have created part of a business plan. Your entire business plan should include more then just information about your products and services; you must also include information about your cash flow projections, tax returns, and other financial statements. This will provide the lender with a well-rounded opinion of your business and it can help them make a better decision as to whether or not they will offer you the funding. A convincing business plan will show the lender how you will repay the loan and how you will remain in business for many years to come.

Another step you need to take to acquire financing is to head back to college. If you didn't get your degree, now is the time to do so. Studies have shown that college-educated borrowers pose a lower risk to lenders and they are twice as likely to offer financing to these individuals. They will also give you a lower interest rate for the loan. Work-related experience is also important to show the lender that you have the drive and experience you need to succeed.

What happens if you are turned down from traditional lenders? Where can you turn to for financing? Your best option at this point is to look for investors like your friends or family members, angel investors, and venture capitalists that can offer you the money you need for your business. Just make sure you are able to repay the money in a timely manner if you are borrowing from friends or family members as it can damage your relationships with them if you aren't careful.