Finding money to finance your start-up

Entrepreneurs spend roughly $70,000 to start a business. Obtaining money to finance a start up can be challenging and often frustrating for many entrepreneurs. Almost 1 in 3 small businesses will fail within the first year so lenders have a hard time believing every entrepreneur that walks thorough their doors. This article will discuss some of the things you need to help your business find the money you need to get started.

When you are looking for funding, you must have a solid business concept. You must know your competitors well along with your target audience. The more you know about your market, the more the bank will trust you when you are laying out your business concept. Banks want to know their investment is worthwhile and that they will receive their money back in a timely manner. To go along with your business concept, provide a strong track-record in the market. If you have helped other businesses succeed, the lender will look at this as an experienced management team and they are likely to approve you for a loan.

Always provide lenders with a detailed list of how much money you need to start your business and where you plan to spend that money. You must then provide them with information on when you think you will need more financing in the future and how much financing you will need at that time.

Look at alternative financing options instead of just a bank. Since most lenders will ask for a great deal of collateral for a first-time borrower, it is important to check all your options. Angel investors and family investors may be able to provide you with the necessary funding. You will need to come up with most of the money out of your own pocket in order to attract some of the other investors.

To convince a lender that you know what you are doing, hire some good employees. Find people that have skills in different areas like marketing, finances, and human resources. Since you probably don't have the money to pay them yet, you need to obtain letters of intent from them. These letters will provide the lender with information on what the terms and conditions are for their job and that they intend to quit their current job once they receive the necessary funding to get started.

One of the most important things you need to discuss with a lender is how you plan to raise money for the business outside of loans. Prepare some fundraising efforts like company run/walks and include this information in the business plan. Provide realistic expectations of what you will receive from your fundraising efforts so the lender knows you are not in over your head.

Review all the legal aspects of your business to make sure you are in compliance with everything. You should do this before you enter the lender's office or else this may hold up your application. Some of the legal documents you need to be concerned about include the following:

• Legal rights to your property in the event that the business fails


• Employment terms


• Management rules


• Securities laws

If you are denied the loan, you need to start networking your business to find investors. Angel investors are often found through good networking and they can easily help you raise all the money you need to get started through their network of contacts. If you have a large list of investors, they can actually improve your chances of getting more funding in the future from a bank. Investors will be known as members of your management team and this helps to boost your reputation.