Preparation – The Key Success When Looking for Funding
Conventional loans, SBA Loan Guarantee, Business Angels and Ventura Capitalists are all sources of funding for new and existing businesses. Though they vary greatly there are some baseline components that are the same for each funding source.
Plainly stated, “You have to give to get”. What you give is directly proportional to the amount of risk the funding source has assessed to your venture. That “give” is usually either in the form of collateral or equity. Either way, prepare to give up something to get the funding you need. This is just the way it works.
Even with the new “Crowd Funding” you have to give something, which is typically a product on pre-sale. By the way, don’t try to give equity or factional ownership via Crowd Funding as it is illegal on a Federal level and depending where you live, on a State level as well. The penalties can include jail time. Yikes!
No matter which funding route you choose make sure you have done your homework first. That means:
1 Understand the pre-fund or application process the selected funding source uses. It is their game and you must play by their rules, so before you do anything make sure you understand what the lender/investor is looking for and make sure you give it to them in their format.
2 Don’t overstate your projections or forecasts. Painting a glowing but not realistic financial picture will not get you funded. That would put your entire presentation/information in doubt. Any mistake, especially with the numbers can invalidate your entire concept. Financial errors can “poison the well”.
3 Respond to questions or additional information quickly. You are being judged not only on your concept or business but on who you are. If you are not professional in all your communications and appearances with lenders and investors you are hurting your odds of getting funded. Especially when investors are “Betting on the jockey”…that’s you!
4 Don’t just look for the money. Look for resources. Even with conventional loans or SBA loans it is important to choose lenders that can help you beyond the loan. This is even more important with investors who typically will take on very much more interest in the day to day operation of the business. They want to know how you are spending their money and what are you doing to insure that they will have a commensurate rate of return. And in most cases, they can help you by committing their expertise and contact list to help you make them a decent return. All this means is that the same amount of money from source A as source B is not equal. Smart founders look for the funds but make sure there are resources there as well. In the long run, the resources can be more valuable than the funds invested.
These are just a few of the do’s and don’t to building a better pathway to funding. Just like anything else in life, those that are prepared usually have greater success than those that don’t. Funding is not a place to “wing it” Do your homework. Take the time necessary to vet lenders and investors just like they do you. Look for the right match and you will have greater success in attracting the funds you require.
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