Whether you are a startup or need to bring in more capital to existing business, you need to follow some basic steps to funding your business. Some of these are mentioned below.
- Identify the funding need
Short term requirements like funding the trading stock, debtors or day-to-day buying, will usually need business credit card or an overdraft facility. Buying a bigger asset like land, equipment or even business, will need a debt product with longer term like term loan, lease, installment loan or commercial bill.
- Get the business plan right
Your business plan would be one of the main things that will help you in securing the funding you need. After all, you have to show the lenders how you’ll be investing their money and making it grow to repay them on time. Writing a good plan for your business is the opportunity for you to actually hone the plans and ideas that you have been fomenting.
- Get the information needed
More or less documents may be required by different lenders, but generally, you’ll need:
- Business and personal credit history
- Business financial statements for startup and existing businesses along with the future projections
- Well-laid out and detailed plan for your business that includes your personal information like education, bios, etc.
- Projections of cash flow for one year at least
- Check the features of the loan
With credit cards and overdrafts, you’ll get cash coverage for a short term, however, they operate differently. When you understand the way you’ll be using a product, it will help you to decide which option suits you best. Clear understanding of the loan features is important to make best use of it and they must be understood well during application phase.
- Know what secures the debt
Based on the credit history, loan amount and your financial position – unless you have a small funding need – some kind of security will be needed. For most of the small-sized to medium-sized businesses it means mortgage over some property, and guarantee from owners of the business. With security, you must also take a look at the costs that have to be incurred for putting it together, various rates of interest for different kinds of security, and the personal liability that you will be having.
Following these simple steps and considerations, you can secure funding to your business easily.