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Need Money to Start a Business? Follow These Steps
Develop a Business Plan
Whether you are seeking a bank loan also known as debt financing or seeking equity capital which can be obtained through friends, family, angel investors, venture capitalists, or private equity firms, your company must have a business plan.
This business plan should be professionally done and include a company description, an industry and market analysis, a marketing plan, a operations plan, a financial plan stating your exit strategy, and an executive summary used as a separate document to highlight the opportunity for potential investors. The business plan should also include monthly or quarterly financial projections for the first 5 years on operation starting at the time of funding.
A business plan may seem unnecessary but keep in mind that any financial institution or investor is looking to reduce risk. A well developed business plan can alleviate some of the risk components and will help your chances of receiving the money your company needs.
Create a Comprehensive List of Capital Sources
There are many options for financing an already well-established operating business but the options are limited for financing a start-up, especially if your company is pre-revenue with no assets such as inventory or accounts receivable.
For most start-ups this means either a bank loan or equity capital. You, as the business owner, must decide whether you have the ability to take on bank debt, which ensures your equity position or whether you want to secure equity capital, which means giving up a significant percentage of your company.
Taking this into account, create a list of banks, venture capital firms, private equity groups, angel investors, and friend and family that are considered to be potential investors. Try and narrow down this group to less than 100 based on the sector which each group invests in.
For example, if you are an internet company, do not have venture capital or private equity firms on your list that invest in agriculture. This will be a waste of your time and most likely the firm will not even read your email.
If you are looking to secure bank debt, do your research first to determine exactly what the loan officer needs to see during the meeting. Every bank is going to be looking at the likelihood of you being able to pay back the loan, which means they are going to need to see a business plan, personal financial statements, business financial statements, and financial projections for your new business. Furthermore, if you own your home, you may also have to use this asset as collateral against the loan.
Have a Private Placement Memorandum in Place
Having a well-developed business plan will make the process of creating a private placement memorandum (PPM) much easier as it is an extension of the business plan. A PPM is a document needed for the procurement of equity financing. Although you do not need a PPM for obtaining a bank loan, it is always a good idea to have this document in place as there may be a time in the future when you are looking for working capital and bank debt is not the best option. As a result, you will then need a PPM to take on this equity financing.
Download Our Business Plan Template!If you want to create your own business plan quickly and easily, we now offer a business plan template that allows you to develop a professional business plan in hours or days, not weeks or months.
Visit this link to learn more: http://www.growthink.com/products/business-plan-template
OR, Let Us Develop Your Business Plan For You
Our professional business plan consultants can create your entire business plan for you. We will make sure your business plan is sound and ready for investors so you can continue to focus on running your business. Over the past decade, we have created business plans for hundreds of entrepreneurs like you.
For a FREE initial consultation, call 800-506-5728 or complete the form below.
Important: Growthink will never share or sell your personal information and we will keep all business information completely confidential.