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Mistakes to avoid when raising financing for your small business

You have your big idea for a business all worked out in your mind and you have written out a top notch business plan that will pull in any possible funding that may come your way. All you need now is to secure the money necessary to build this business into something lucrative and satisfying. There are mistakes that have been made when raising money for a company that can be avoided if you know what to look out for and if you know exactly what you want out of your business. Here are some mistakes to learn from when raising financing for you small business.

One of the major problems people run into after they have started their businesses is that before they started their business, they didn't acquire enough capital for the business to expand. If your company is going to need materials to rent out, for example, there needs to be enough money available to buy the equipment to generate revenue. When going to investors, don't under ball the big idea that is in your head. If it's good, don't make it a waste of time by under funding the business. Remember to start with room to grow. Don't make it a restrictive environment for your business, otherwise, it will die, quite growing, or if it's a good idea, you will be forced to sell it to a larger corporation who will probably expand that idea and make millions of dollars from it. So remember, don't sell the idea for the sake of selling it. Sell the idea and what it can become to the investors and do it with proper funding.

With the last one in mind, here is a mistake to definitely avoid. While it is a good feeling to own every bit of the company, don't use all of your life's savings into the idea. Don't re-mortgage the house either to secure collateral on a bank loan. The risk here is that if it doesn't pan out exactly the way your business plan says it will, you are left with nothing to feed the babies. Keep a nice little pocket of cash for yourself and for the family so you aren't homeless after a bad experience. Remember that some of the greatest businessmen of all time failed a few times before they succeeded. Start small enough to keep yourself safe, but big enough to satisfy your ambition and the confidence you have in your new idea.

Here is another no no to avoid as much as possible. Don't receive too much money from family and friends exclusively. If you ever ran into a situation where you can't pay them back quickly enough, or you flat out can't pay them back at all, it can ruin a friendship for a lifetime. A man borrowed more than a million dollars from his sister's husband. The promise was that this new idea would have a return well over double what he put into it. It sounded like a great plan. The fact was, it was a fantastic opportunity. But the company had poor management and everyone that had invested lost everything they put in. From that point on, the relationship between those two men was strained and difficult. Money is a tricky thing, so try to keep business at work and family at home. This will protect the people you love and the business you have so much confidence in.

Take this advice with a grain of salt. They don't have to be followed exclusively, but be aware that they are warning signs to help you avoid disaster. They are mistakes to avoid with raising financing for you small business endeavor.

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