A good business plan is incomplete without strong financial backing. Cash flow is more like the lifeblood of a small business; without it flowing through the business, there is possibly no way it is going to survive.
Over the years, there has been a tremendous change in the way small business sources for funding. In fact, for the past 10-years, businesses that are big in their respective industries had, at one point to look for a way to source for funding.
Presently small businesses now look into means of funding their businesses such as crowdfunding, peer-to-peer financing, instant bank loans, and many more. Whichever of these means you are thinking of considering to help source for funds for your business, you need to take certain critical steps to help prepare your business for funding.
Having gone through this same process in the past few years, I have a clear picture of what is running through your mind about what these critical steps could be. You don’t have to bother yourself about that anymore because right here, I will be sharing five critical steps to prepare your business for funding. These are not just mere assumptions; they are steps I used when I was about taking my business to the big stage.
As a small business owner who needs funding, you can’t afford to neglect any of these critical steps below;
1. As a business owner, you must become creditworthy
Being creditworthy has nothing to do with your bright idea with the potentials to earn billions of dollars when successful. That doesn’t count here. What you should be looking at when preparing to source for funding is your financial history. This count to a great extent and will determine if you will be able to get funding or not. When sourcing for funding, your potential investors will always like to take a look at the financial issues you had in the past. They would like to take a look at your credit report and check how you handle your business and personal task.
As a business owner, to prepare for your business funding, you need to make sure you have no negative credit report. And if you have bad debt, clean your books before you. Please take note of your credit report and make sure they are accurate and free from errors. Also, settle all your business and personal tax. The moment you address all these issues before the funding, the quicker the process, and the high likelihood of getting positive results.
2. Build a better business plan
When it comes to funding, another area that investors are most likely going to check out is your business plan. This means your business plan has to be realistic and well thought out. When developing the business plan, you need to make sure it outlines in detail the intended budget that your business needs, marketing plan, financial plans, management, and target audience. You also need to make sure your intended investors understand the fact that you understand what you are getting into, and that is going to work out well. This is one thing that many business owners miss out on.
Also, your business plan should clearly explain how your business will generate revenues and how your business will be able to survive while repaying the loan. All of these come down to one single thing; you need to make your company believe in your dreams and buy into it without hesitation.
3. Plan for the worst-case scenario
For you to get the required funding for your business, most investors request for financial projections for 12 months. These projections are to be segmented into 12 different phases representing how you intend to run your business if funded for 12 months. With this, they will be able to figure out how realistic your plan is and the chances of its survival. As a business owner, you must not just know how to prepare this, but how to prepare it in such a way that your potential investors will see that you have plans in place for the worst, should things fail to go as planned. While doing this, your projections should also cover for the best and middle case scenarios.
To catch the attention of your potential investors, you can provide answers to questions like; How will the business survive if revenue drops by 15%, 25%, or 50% over the next 12 months? Getting this out in a simple, and a well-detailed process helps to prepare your business ahead for funding.
4. Prepare two years of business history
Potential Investors in the business world today are going to want to know how much equity the business owner has injected into the business for two years at a minimum. Of course, no one will want to invest in a small business in which the owner is not fully involved. Knowing this before going ahead to source for the fund should give you an edge to prepare all the financial statements that clearly show your involvement financially for as long as you can get. With this, you will be able to convince your potential investors even more.
5. Become the man on the job
In addition to getting involved financially, you also need to be involved physically. This can only be achieved if you are the man on the job. Apart from the physical benefits, you also get to know all that is need about your business. Below are some of the things you can do to keep up with the process and get prepared ahead.
Receive all the amounts outside your business- This is making sure your financial book is clear of any debts. Doing this proves to your potential investors that you are capable to financially handle all kinds of customers when it comes to receiving payment.
Before going ahead to source for funding of your business, you need to make sure all the cash liquidity is not tied up in your inventory.
Check your business expenses and try as much as possible to eliminate items that can, in one way or another, generate additional cash flow in your business.
These critical steps to prepare your business for funding is what you need to take your business to that big stage and give your business that big break. Take advantage of this right now and get that funding you deserve.
Nothing good comes easy; it depends on how hungry and determined you are for the future of your business. As an entrepreneur on the rise, you have to overcome this and become better with time. The tips shared above should put you on the right track and get you going. Take the steps above, and the funds you need for your business will come around.
You can drop me a query if you have any related to business funding. You can as well share this information with your friends and especially those you believe they will benefit from this info. till next time, Cheers!
