Business Loans

Financing A Company Of Any Size

Even after you’ve officially opened your business, your need for capital doesn’t suddenly vanish. You’re still a growing enterprise, and a good lender can become a valuable partner in every stage of that growth. Whether you want to expand your number of locations, purchase new equipment, or add more inventory, having a financing partner around to help can make a huge difference.

In these guides, you will learn about your options when it comes to building a partnership that will let you focus on what really matters—growing your business—instead of on everyday worries such as making payroll.

Determining Your Eligibility

It’s quite common for a new business to face resistance when they seek an influx of capital. Being rejected two, three, or more times is completely normal and doesn’t mean that you should give up your search. A business owner might have to apply for loans at multiple locations before any of the lenders accept the application. A lot of the time, it comes down to relaying your great business concept to any potential lender.

Alan Guin, managing director and CEO of The Guinn Consultancy Group, Inc., based in Bristol Tennessee, believes that good ideas attract investment.

“If you have a unique and profitable idea, you may find that the money you are seeking may actually find you,” he says. “I know that’s counterproductive to all the business school courses you took or all the advice you’ve received from your accountant or attorney. But great financing seeks great ideas. New ideas. Something new, different and exceptional. If you have that idea and if you have the ability to generate a business like that, you’ll find someone to marry you with the money you need…or they’ll find you.”

Once you do find someone interested in adding their cash to your enterprise, they’ll look for several things before entering an agreement. These include:

Whether You Can Show Business Revenue

While most lenders understand that a new business requires capital before it can generate real income, they’ll still want to see some evidence of income before committing. Make sure you have your financial reports in hand and use them to show the current and expected profitability of your business, which will eventually allow you to pay off the loan.

How Long Your Business Has Been in Operation

Lenders like to look at a company’s history for signs that it has the ability to last. Even though a new business has a thin track record, you shouldn’t let that daunt you. Your job history and previous experience may be able to prove that you have the know-how to run a business in your area of expertise.

Whether You Own a Big or Small Business

According to the definition of the Small Business Administration’s Office of Advocacy, a business is classified as “small” if it employs fewer than 500 people. Yet, not all lending institutions use this definition, and some may categorize a company based on total revenue. It’s worth your while to find out how your business is classified by various institutions since some loan and grant programs are only available to small businesses.

If You Have a Viable Business Plan

Before you approach a lender, you’ll need a high-quality business plan. Make sure it properly details the concepts, resources, and goals for your business. If you’re a small business, you’ll be competing with larger companies for investment capital, so it’s important to have a professional presentation when you file an application or approach a venture capitalist or angel investor for partnership.

What Kind of Personal or Business Credit Score You Have

Lenders will look at a company’s credit score when deciding whether or not to extend a loan. For new businesses, however, the only credit score attached to it may be the owner’s, because the company hasn’t had time to build its own.

How Much You’re Asking For

A new business could find it easier to find funding if they ask for less money upfront. Guinn points out that a business may need less capital than you think.

“You need just exactly what you need to start–probably less than half of what you expect, and maybe even less–to prove out your concept,” Guinn said.

How to Create a Business Plan

Like many new business owners, you may feel daunted by the idea of creating a business plan. But remember—nobody knows a business better than its founders, and the passion you have for your company will show through on each page.

First, step back and think about what concept made you start your business in the first place. That’s the core principle that is most likely to convince potential investors or lending institutions that they should partner with you.

“If it’s a great idea or concept, you won’t have to work hard to sell it,” Guinn says. “People will want to be a part of it.”

Now that you have your concept worked out, here is a step-by-step guide to creating a business plan that will get results.

1. Plan Your Spending Strategy

Take a moment to really think about your financial goals. How much money are you seeking, and how will you use it? Write your plan with these goals in mind, because your potential lender will be the most interested in how you plan to spend any money they loan you.

2. Have a Vision

If you don’t already have one, sit down and write out your company’s core values, mission statement, and vision for the future. These core concepts will recur throughout your business plan and underpin your corporate goals as your company grows.

3. Write an Executive Summary and Describe Your Business

An executive summary delineates how much money you are seeking and how you intend to use it. Having this information up front and visible will enable anyone who is reviewing your proposal to see the most important points all in one place. After your funding request details, swing into your business concept, describe your future goals, and give an overview of your place within the industry. Be sure to mention how your planned growth may impact the pre-existing structure of your company and how you intend to manage that change.

4. Discuss the Market and Competition

This section requires you to gather information and relay it quickly and accurately. You want this part of your proposal to be straightforward and easy to grasp. Describe the current market and how your company will fit into, or revolutionize, it. Demonstrate that you’ve researched what consumers want to buy, and reviewed any competing companies that may impact your ability to reach new customers.

5. Describe Your Team

Anyone reading your business plan will want to know about your team. Don’t merely list each employee’s qualifications; include the ways that each of them contribute to the wily operations of your business. This section will help potential lenders gain perspective on how management practices and employee quality work together to advance your company’s success.

6. Create Your Budget and Revenue Forecast

A very important part of any business plan is a complete financial workup. You’ll need to gather all the financial information from your business since it was founded. This information will help you build a sales forecast and a budget, both of which are vital to any financial plan. Demonstrate the cash flow of your business in concrete terms, including all of your monthly business income and every dollar spent.

7. Network

Talk to experts for advice. As Guinn recommends in a final piece of wisdom, “If you are intimidated by securing financing for your business, talk with someone who has successfully raised funding previously and let them share what they did to secure their funding,” he says. “Often, those who fund projects may be seeking other projects, and you can be introduced to lenders who are seeking a new investment.”

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