Before you even think about approaching lenders or investors for funding your business, you must know how to prepare well so that you receive a positive response. It should not happen that in your eagerness to start up the business you make some hasty decisions in funding that could only delay the prospects of starting up.
You must have a solid business plan, which forms the platform on which you build your campaign for seeking funds. A well-written business plan enhances your chances of securing funds. The business plan must be convincing so that investors and financiers find enough merit in it. Only when they see enough evidence that points to the good demand for the product or service and that customers would buy it at a price that enables you to make a profit will they would show interest to fund your business.
Factors that improve your prospects for funds
- Besides ensuring that your business will be profitable, contributing some funds on your own as a personal investment for starting up would demonstrate your seriousness about the business. By holding a personal financial stake in the business, you tell investors about your intention of doing justice to the funds they provide. This would convince lenders and investors about your commitment to do well.
- Investors are interested in high returns from investment. If you can assure investors of high returns and be able to deliver the goods (product or service) faster, it would improve your chances of garnering funds. Choose a defined market of adequate size with considerable purchasing power that would ensure your profits.
- Choose a market that is large enough and with high potential for growth because investors would like it as the returns are likely to be high. You should explain how you could gain a competitive advantage over your competitors.
- Demonstrate your ability to have a firm grip on the quality of the product and logistics related to the timely delivery of product or service. Also, highlight the capabilities of the human resources you would use. You have to establish that they have the requisite skills and experience to deliver high-quality goods or service.
- Provide the correct estimates of the money you need to start up the business and avoid being vague. Give solid projections based on realistic figures that make sense to investors who want to judge how wise it will be for them to invest.
The intermittent requirement of funds
Meeting the above requirements would improve your chances of winning over investors as you could see your ideas and dreams of starting the business turn into reality. However, this should not make you complacent because the battle has just begun and you will regularly require additional funds in the process of running your business.
No matter how well you fund the startup and budget for going ahead, you are likely to face cash flow problems, which is part of any business. There will be situations when you might find it difficult to pay bills for inventory, meet payroll expenses or unable to avail some business opportunity that requires extra money.
For maintaining steady cash flow that sustains the business and ensures its growth, you have to arrange for funds intermittently. This you can do by using the money you earn from business as the real estate agents do by availing real estate commission cash advance.
Turn to self-financing
Real estate agents rely on using the earning from business to put the money back into the business. They finance the business with the money they earn. Commissions are the only source of revenue for real estate agents, mortgage agents and some other professionals like insurance agents and travel agents.
Real estate agents have to wait for many weeks before they can monetize the commission only after deal closure. The cycle for earning stretches by the number of weeks it takes to complete the deal. Meanwhile, they need liquid money so that they can invest funds quickly to ensure the smooth operations of the business.
Instead of waiting for the cash from the commission, they advance the commission payment by selling it to some advance commission company that buys it at a discount. Being able to get the money immediately, they use it for business so that the cash flow remains steady and smooth.
While self-financing is a good option to keep the business running smoothly, if you want to grow fast, you have to tap external sources for funds. It would strengthen your financial muscles so that you can take full advantage of the growth opportunities that come your way.
This takes us back to the basics discussed in the early part of this article that highlights the need to prepare well for convincing lenders and investors to take an interest in your business. Once you establish your credentials to investors, funding should never be a problem.