Preparing to Raise Capital
Preparing to Raise Capital
One of the most challenging aspects of running a small business, whether you own a start-up or a mature business in expansion mode, is raising capital. Many businesses fail due to insufficient capital to cover operating expenses and invest in growth. Without operating and expansion capital, business owners have limited options at a time when more options to add products and services is the key to business success.
Start Early to Find Capital Resources
The key to finding sources for capital is to plan well ahead of anticipated needs and to develop an effective business plan that describes in detail how your business will make the money to repay lenders or investors.
Clear, understandable, transparent communication is key when seeking cash to grow a business. The ability to describe company goals, needs, and the potential for success is critical. Prospective investors want to know about your products and services, your employees' expertise, your current financial position, your marketing plans – everything required to effectively evaluate whether lending or investing capital makes good business sense - to the investor.
So Where Do You Start?
- Be transparent and honest. Disclose both positive and negative consequences to investing in your business. A great relationship with a lender or investor is based on forthright communication. Whether your business is struggling or thriving, potential lenders and investors scrutinize every aspect of your operations. Your company is under the fiscal microscope.
Further, it's essential to keep lenders and investors current on actual or potential financial problems. Often, your capital "partners" help overcome problems. Surprises make lenders and investors rightfully nervous, so be straight.
Here's the key: When you seek capital funding, it is important to remember you're the "face" of the business. You represent the enterprise. Be prepared, plan ahead and always be ready to show lenders and investors why investing in your business is good business for them.
While your need for funds is critical to you, investors and lenders want to know the benefits to them. Weigh risk versus reward the way potential investors do. No savvy investor, no traditional lender, will take a flyer on your business and hope for the best. It just isn't going to happen.
Put prospective investors and lenders first. Weigh their needs for security and a clear plan for payback.
Then, deliver on that plan. This creates a good credit history and insures future investors and lenders will be more inclined to risk capital on you and your business in the years to come.
Having access to business capital, regardless of the source, is the cushion you need to weather a choppy economy and grow your business in good times and bad.
And that's the key to long-term business success.