Top 5 Things You Need to Know When Your Are Seeking Debt Funding For Your Small Business

November 24, 2016

Top 5 Things You Need to Know When Your Are Seeking Debt Funding For Your Small Business

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Yes — stacks of capital needed to fund dreams of a vast and bright future.

Being a startup founder can be downright challenging. Whether it is developing a sound business plan, building a team, or acquiring customers, you will be dealing with a sheer number of hurdles.

Moreover, if you’re not backed by an elite accelerator, getting your startup off the ground can be an uphill battle. Raising money for your company requires you to think strategically. However, before you go on building a solid business plan to impress your debt financier there are few things to look out.

 

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image source:yourstory

Here are important questions that you should ask yourself before going ahead to raise funds

1.Why are you raising money to begin with?

What made you think you should raise money to fund your business? Are you plugged into the local startup scene, where everyone raises more money than they know what to do with? Or have you pivoted one too many times and now you needs funds to keep you going?

More often than not, we raise money for the wrong reasons. Figure it out.

2. How well do you understand your audience?

Every business provides a solution to a problem, plain and simple. That solution is designed for a specific audience or customer base. If you don’t understand your audience, you won’t build a sustainable business. You might make some sporadic money, but you’ll suffer from the classic “feast and famine” model of entrepreneurship.

3. What will this money allows you to do that you could’nt do without it?

Are you going to hire people? Buy equipment or inventory? Hire contractors to build your app or website?

The minute you hire people, you increase the stakes. Now you have to bring in enough revenue to not only pay your own salary, but also to support each of your employees.When the investment money goes away and you’re left with your app or website, will you be able to maintain it? Have you built the ongoing maintenance costs into your business model? What will happen when you have bugs that need to be fixed?

Raising money allows you to do all kind of fun things in the short term. Those short term decisions have long term effects on your business. You need to know this before hand.

4. How much runway time will buy this for you?

It’s tough to know how long it will take to build revenue. Generally speaking, it will take as long as you have left on your timeline.

A better question to ask is: if I wasn’t raising money, how long would it take me to make enough money to make the business sustainable if that were my number one goal? Can I make it that long? If not, then you might need to raise money. If so, why would you raise money?

5. If you were absolutely not allowed to raise money, how will you build this business?

Raising money is a great way to convince yourself that you can create your big, badass vision overnight. The reality is that before you can build an empire, you must first build a single town FIRST.

Before you can publish 500 blog posts, you have to publish 5. Defining the world of your business in the right way will inform so many of the decisions you make. 

About 90 %startups fail to acquire capital for their businesses, and eventually shut down.

You don’t want to be one of these cold statistics, which is why it is crucial to understand the right methods of debt fundraising. Moreover, the first stage of funding tends to be the most time-consuming one. You want to ensure that you get off on the right foot………….. HOW ???

 

How Do I Raise Funds For My Business??

 

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image source:entrepreneur

The most common source of startup capital is the business owner him- or herself in the form of credit card advances, and loans from family members.

1.Image result     Being realistic – How much capital does your business needs?

Entrepreneurs are often wild-eyed optimists, an often necessary attitude to get their ventures off the ground. But instead of a unique product, record sales, and slow competitors they usually envision, the real world is quite different.

While  planning is often tedious and time consuming, executing a plan means several things:

  • You will get a better understand of your market and the competitors you will face
  • You may avoid costly disastrous mistakes in the future
  • You will have a realistic view of the capital needed to start your business and keep it alive until it can stand on its own

 

2. Image result       Creating a solid PITCH

Ensure that your pitch talks about your vision for your business and the strategies you’ll implement to achieve it.

Here are few aspects you should keep in mind when creating your pitch:

  • Emphasize your strengths and make your pitch excellent by making storytelling an essential part of it.
  • Include the goals of your company, the problems you plan to solve through your service/product, and the reasons your target audience will find it appealing.
  • Keep fine-tuning your pitch as your receive feedback from the debt funding investors

 

3. Image result      Maintain your accounts

A list of expenditures of the previous and the upcoming months should always be maintained. This helps you keep track of where the money is going and how much money will be needed. As a result, while going to an investor, you can always show them the accounts and logistically present the amount of funds required.

4.  Image result    Go meet 3-4 debt funding investors and see what they are asking for

Meeting an investor can be a learning experience. Listen to all the questions he asks for after you give your presentation and make a note. Remember, those are the areas the investor is not comfortable with. The more you meet investors, the more you will be able to understand the loop holes in your venture.

5. Image result      Consider funds as a BONUS

Planning a startup on the basis of bootstrapping is considered to be an ideal one. This helps you concentrate on your business completely rather than hunting for an debt funding investor. Also, this will help you control the company completely without any pressure from outside investors.

 

Final Thoughts

There is much more and beyond than the above mentioned 5 questions. However, these are the basics to remember when you are approaching a debt funding investor to fund your small business. 

Building a company is no a piece of cake. A hard and testing journey, it is mired with pitfalls along the way.

We have tried to touch upon a few in this piece, more relevant to when you are raising funds and those that have an impact when you are raising funds.

Good Luck!!

need-funding-tab

debt-funding-experts

 

 

Image source:kplinger

 

 

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