Be it economic slowdown or good business times, a start-up always finds it difficult to raise money for its operations. And while there are numerous ways to Finance Your Start-Up, you may still face some hurdles when you go out to get some funding. We discuss some of these hurdles and help you with a solution so that if faced with such a situation, you can necessary steps to thwart it.
Lack of Faith:
For first-timers, this is often the biggest hurdle. Their inexperience in the field of doing business, the absence of a ‘track record’ can cool off many an investor or banker. They are, after all, worried about their money and want to safeguard against losing it. The best way to tackle this problem is to prepare a good business plan that will clearly define the goals that you have set for the business and also streamline the methods for achieving them. The prospective investor/banker will then be able to take a decision based on the merits of your business plan.
Doubts on The Business Model:
It is not enough to have a business idea. You need to be clear with the complete model and the revenue-generating channel. Else, your business plan will fall dead in front of investors. Hence, in case you need the money for starting-up, define clearly how your business will generate revenue, what are the projections for the years ahead, before you approach an investor. In case you want the funds for expansion, show the prospective investor the current channels of your operations in order to instil confidence in him.
Doubts on Your Credit Capacity: Loan repayment is topmost in the minds of lenders, investors and bankers. And unless you have a good credit reputation in the market, you may find it difficult for funds to come by.
The best way to tackle this problem is to convince your prospective investor about your repayment capacity. Collaterals and tangible property papers come in handy to offer as mortgages. For investors who are looking to have a stake in your business, a written agreement to that effect will allow the funds to come in. But remember, this is not as easy as it sounds.
Carefully weigh all your options and go in for mortgages or stake dilution only when you have made a thorough risk-benefit analysis. Finally, as discussed in the beginning paragraphs, the key is to build a strong financial plan for your start-up.
This will help you to look credible and reach out to investors. The basic fundamentals are to create a revenue projection, create a separate bank account for your start-up, build financial plan for one year, acquire a business credit card, get yourself an accounting system etc. We would like to hear from you the hurdles you faced in procuring finances for the running of your business. It will also be wonderful to know how you overcame them. Do write into us with your experiences.