Raising capital to start a new business may seem like a daunting task, but it need not be overwhelming if you follow a few basic business practices. If you have a viable idea that will net a return for your investors and prepare a compelling business plan the chances are good that you can find investors to join you.
Your first task is to create a business plan, sometimes known as a ?business proposal? or ?prospectus.? Your business plan needs to be very detailed and concise. You should include information about your educational background, experience and training in the area of business you are contemplating. Just like a resume for a job, include references and any other favorable personal qualities that you feel reinforce the reasons why an investor should trust in your ideas.
It can't hurt to include any information you feel comfortable sharing with regard to your positive credit history. If you have records of various satisfied loans along with the payment history, that information could be helpful to prove your stability with regard to financial obligations.
If you are requesting financing for an existing business the rules are a bit different than a new business startup. The current owner should be able to provide you with profit and loss statements. If you are purchasing an online business, statistical information pertaining to traffic, number of units sold and paid advertising are definitely necessary. The purchase price of the business needs to be included along with detailed information about how you intend to service the debt as well as how the potential investor will benefit from your request.
If you are seeking investors for a new business, the information required increases. In addition to the information outlined above, you will need to include market research, projected costs and a detailed summary of how you intend to generate income. This information needs to be projected for a period of three to five years. It's a good idea to project your expenses on the high side.
Have some idea of what you expect to pay your investor. The only reason someone is going to lend you money is if they can see decent profits in exchange for lending it to you. Your market research had best substantiate that your plan is viable and will provide them with sufficient return on investment to justify their involvement.
Before you begin your search for investors, it's a good idea to have an attorney and/or accountant take a look at your plan. A good professional may suggest specific points that you may have overlooked.
Once your paperwork is in order, it's time to start looking for investors. One place to begin your search might be friends or family. You might approach them singularly or in a group. Whatever method, you need to have a complete copy of your proposal carefully outlining your research and what they can expect in return for their assistance.
Read the classified pages of your local newspaper. Venture capitalists often advertise this way. Their rates are usually pretty high because they have a tendency to take on ?risky? investments. A twist on this method might be to run your own ad either locally or nationally. If you select this method, explain the particulars and emphasize how much they can expect to receive for the load of their funds.
Use local business directories to find companies that specialize in ?investment services.? You can approach a local bank, but try and find a bank that specializes in industrial or business type loans.
You might consider incorporating and selling stock in the company.
Another option might be a ?money broker.? This can be risky. There are some legitimate brokers and others who operate on the shady side.
Be creative. If you believe in your idea, don't be afraid to do what ever it takes to launch. There are plenty of ways to come up with the capital you need. Think outside the box. Whether you are looking for $300 or $300,000 the money is there you just need to dig for it.
Invoice finance is increasingly becoming a more popular way to fund a business as an alternative to the traditional overdraft. Unlike an overdraft, which is usually secured on personal and/or property guarantees and set at a rigid limit, an invoice finance facility is secured on sales invoices and will increase as your business grows.
There are facilities to suit most businesses, from new-starts to long-established, from 100k to 50 millon pound turnovers, from those with only UK customers to those trading overseas. As long as you have business customers being sold to on credit terms, then funding may be provided against their invoices.
There are two main types of facility; factoring and invoice discounting. Within these are a variety of options.
Factoring - a service, not just funding
The services available with a factoring facility can free up a great deal of management time, allowing you to concentrate on what you do best. It will also take away the pressures of managing your cash-flow, as the facility will be growing as your business does.
Up to 90% of the value of your outstanding invoices could be made available to you immediately and credit limits will be provided for your main debtors. Credit control & collections services are provided by the factor and an internet based facility enables you to manage the funds available.
There may be the option of the facility being 'confidential'. It's also possible for you to do your own credit control if you can demonstrate good procedures.
Invoice discounting, funding with the funder staying at arm's length
This is normally for companies who have good systems in place. If the company can demonstrate this as well as being profitable, then the facility may be offered as confidential (your customers don't know the involvement of an invoice discounting provider).
Less management of the facility by the provider is required and so, can prove a cheaper alternative to a full factoring facility.
As with Factoring, up to 90% of the value of your outstanding invoices could be made available to you immediately, credit limits will be provided for your main debtors & an internet based facility enables you to manage the funds available to you. In addition, you will retain control of your sales ledger management
Charges: Two charges apply to the facilities, a service charge for the administration of the facility and an interest charge, which is calculated for the funds you are using at any time. The service charge is calculated as a % of your projected turnover. The % will depend on the turnover and amount of invoices you are raising.
Providers: There are around a hundred providers ranging from high street banks to independent lenders. On the surface, many appear to offer the same facilities but a specialist brokers can ensure that you are introduced to the most suitable for your needs.
Both Terry Frerker & John Mce are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Terry Frerker has sinced written about articles on various topics from Diamonds, Guide Guitar and Photography. Terry Frerker is an entrepreneur who has a one step system to success. If you would like to contact Terry for his one step sytem you may do so at hawk07@cox.net or