7 Steps to Getting Financing for Your Business

Financing your business is hard. It takes time and effort to get the money you need for your business, especially if you don’t have any experience in the field.

Especially if you don’t have any personal connections. Financing is one of the toughest tasks that a small business has to face, but it doesn’t have to be impossible.

What is financing?

Financing is a loan that a business receives from either a bank, or an individual. The money you get from financing is used to help start your business, or expand it.

It is the process of obtaining capital to fund a business by borrowing money. It can be done through internal financing, external commercial lending or with other sources of funds such as start-up investors and venture capitalists.

The loan may have an interest rate (or repayment period) which must be paid back over time in order for it to become profitable for the lender.

Financing does not necessarily mean financial support but rather assistance that allows an individual, company or government body achieve something they would otherwise struggle with because it requires more resources than these parties currently possess.

Why do you need financing?

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  • The money you get from financing is used to help start your business, or expand it.
  • If you are starting your company, you need to have some funding to keep it running.
  • If you are expanding your company, you need financing for the new machinery you will be buying for your business.
  • Either way, financing is necessary for any company that wants to grow bigger and better than it already is.

What you need to know before you start

You can get financing by yourself or with the help of a financial institution such as a bank or any other organization that offers loans.

There are many things that determine whether you will get the money that you need and if not, what alternatives are available.

Here are some of the things that affect whether or not you will get financing:

Your Credit Score

If you have bad credit, it will be much harder for you to get financing. You will have to put up more collateral, or show that you are able to pay back the money you are borrowing. If your credit score is good, however, lenders will be more likely to trust your ability to pay back the loan.

Personal Finances

If your personal finances are not in good shape, it can affect whether or not you get financing. This is because lenders want a guarantee that they will get their money back when they give out a loan.

If they don’t think they will make their money back, they won’t give out a loan. If your personal finances aren’t in order, start working on them today so that when the time comes for financing, you will be able to get it and grow your business!

The type of business you are trying to finance

If you are trying to get financing for a business that is already established, lenders will be more likely to give you the money.

This is because they are confident that the business will be able to make money and pay back the loan. However, if you are getting a loan for a new business, lenders will be less likely to give you a loan.

If you are trying to get financing for your business, don’t expect it to happen overnight. It takes time and patience. But if you keep at it and follow the advice in this chapter, your chances of getting financing will greatly improve!

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Steps to Getting Financing for Your Business

#1. Finding Funding Sources

If you want to get financing for your business idea, the first thing you need to do is determine which funding sources are available to you. Figure 16-1 shows the different types of funding sources available and the best ways to find them.

FIGURE 16-1: Different types of funding sources.

#2. Getting Approval: Getting Ready for Funding Approaches

When approaching potential investors, you need to make sure that they are interested in what you have to say.

Most businesses fail because their founders don’t understand this important fact. You need to make sure that potential investors get what they want from your business — money!

The first step in doing this is preparing a business plan. However, before you start working on your business plan, there are some other things that you need to do first:

  • Get approval from your company’s board of directors. If you have a small company, you’re probably in the minority, so your board members are probably the ones who are most interested in your success. You need to get approval from these people before you can start working on your business plan.
  • Have an idea that’s worth investing in. Many small businesses fail because they don’t have a good idea that has real potential to be successful. If you don’t have a good idea, then you need to develop one before you can get funding for it.
  • Find out who will be investing in your business and how much they will invest. This is where the business plan comes into play again — it gives investors a clear picture of how much money they will be putting into a project and what return on their investment is expected.

#3. Finding Investors: Finding Potential Investors

You want to find the investors who are most likely to invest in your business. Investors have a lot of different criteria for investing, so you need to find out what those criteria are before you can get them to invest in your project.

If you’re an employee at a large company, then you may be able to get funding from the company in which case you can skip this section.

But if you’re starting a small business, then finding investors is an important part of starting and running it successfully.

#4. Getting publicity for your business

One of the first things that investors look for when considering whether or not to invest in a company is publicity — the number of articles about the company and its products that appear in newspapers, magazines, and on TV or radio stations around the country.

Getting publicity is expensive — it costs money and time to put together press releases and send them out to various media outlets around the country.

If you don’t have any money, then getting publicity isn’t going to be a big part of your business plan.

However, if you do have some money to spend, then getting publicity is an important part of your business plan.

If you’re able to get lots of media coverage for your company, then you’ll have a much easier time getting investors because investors will love to see that the company is already making money.

If you have no money to spend on publicity and you want to start a business, then consider starting a small blog or website that gives people information about the latest trends in your industry.

You can also build up the number of links from other sites that point back to your site so that it looks like it has lots of traffic and lots of links back to it.

Then when you do start spending money on publicity, people will be more likely to believe what they read on your blog or website.

#5. Getting a bank loan

Banks are businesses just like any other business; therefore, they want to make money. Therefore, if you can show that you have a good idea for a product or service, then they’ll be more likely to give you a loan on your business.

For example, if I wanted to start a website that sold vintage clothing, then I could show the bank that my site would have lots of traffic and lots of sales.

In addition, I could show the bank that I had lots of other people willing to buy my products. Then the bank would be more likely to give me a loan because it would know that it was getting some good returns on its investment.

If you plan on starting a business where you make many products or provide many services at once, then think about starting your business with money from other people who are already successful in your industry.

This way you can get access to much larger amounts of money than if you started out with only $1,000.

#6. Finding mentors and sponsors

You need to find people who are successful in your industry that you can learn from and use as mentors. These people can be older or younger than you, but they need to be successful in their own businesses.

Getting a mentor or sponsor is difficult because most business owners don’t want to take someone else’s advice. However, if you can get someone to give you advice, then it’s better than no advice at all.

I recommend that you start out by asking people your age who have started their own businesses what they did to get started and how they got their first customers.

If you meet with someone who has a good idea for a product or service, then ask him about how he got his first customers so that you can do the same things he did.

#7. Pitch your idea to family, friends, and local businesses.

Find out what kind of funding best suits your needs by talking to family, friends, and local businesses first before pitching them to potential investors so that you know where the best area for investment is for them (for example, family members may be interested in a loan with low interest rates).

Conclusion

The steps outlined in this article will help you get the financing you need to start or expand your business.

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