Obtaining capital tostart a business idea or to improve it is one of the great challenges of every entrepreneur.
Accessing reliable sources of capital is a task that requires insight. Developing and presenting a project that allows you to obtain from your suppliers that financial source for the launch or expansion of your new company is something that should be considered as part of a good business plan.
This task does not have to be so hard and that is why today I share with you several strategies that you should consider when seeking financing for your business projects. These are at least 5 ways you should know to get opening capital:
Probably the healthiest and lowest cost source of capital out there is personal savings. Collecting money for some time to open your business is ideal because finally the money is yours and if things do not go well, you are not exposing other people’s capital that you later have to pay.
The risk is minimal because the capital is 100% owned by you. In addition, there are no interests or payment commitments to third parties of any kind.
The difficulty lies in proposing a savings plan that will lead you to gather a good fund to start your business.
Knocking on the door with friends or family to get money is also a highly recommended source of capital because it is based on the good reputation that your family and friends have of you.
If you have shown yourself to be a responsible, reliable and determined person to achieve goals, and you also have a serious project, you will surely have all the credibility necessary for an investor uncle or friend to be willing to offer you their financial support.
Of course, in this second investment strategy you should consider the payment of interest or dividends in compensation for the financial support provided.
The recommended term is one or 2 years to pay off the loan, which is still an excellent option that is less difficult than appealing to any financial institution.
The third very common and highly recommended option is to go to a local bank. Most banks will be willing to offer you financing for your projects as long as they are serious and properly written and exposed.
This is extremely important since no banker is going to put his capital at risk in a project that has no potential for success. So the executive presentation of your business plan is key to getting working capital.
The advantage is that the interest they charge you can be minimal and for terms ranging from 1 to 5 years. Of course, the payment of the credit must be considered in your accounting as a liability and on it achieve a utility that allows you to grow and develop.
Another advantage of this strategy is that if you maintain a good credit record with your bank, the subsequent credits you require will be authorized more quickly, with fewer requirements and with preferential interest rates.
Using your credit card as a source of financing is not exactly the most recommended option, but it can be a viable alternative in some cases.
You must proceed with great caution and plan well since the interests with a credit card are much higher and this increases the risk reducing the profit margins.
Using a card can be an excellent alternative for short-term infrastructure purchases, for minor investments or for an emergency in case you need specialized equipment for a job that requires it and that represents a quick return investment.
But, pretending that the card is used to purchase supplies or service expenses is a serious mistake made by many entrepreneurs.. Personally, I recommend you avoid this form unless the return is guaranteed or it is a real emergency.
SME SUPPORT ORGANIZATIONS
Another excellent alternative is to go to organizations specialized in promoting the development of small and medium-sized companies.
Regularly, these organizations have the primary purpose of promoting the growth of SMEs and therefore work investment and training programs in conjunction with governments.
They usually offer sources of financing to entrepreneurs who show they have serious and long-term interesting projects. Similar to the bank credit application, you need to develop a document that exposes the feasibility of your business project and have some guarantee such as a guarantor or property.
Another great advantage is that the interests, if they exist, are quite social, which penalizes small entrepreneurs less.
The disadvantage is that the capital can flow slowly because the procedures can eventually be very bureaucratic.
In summary, whatever sources of financing you seek, it is important that as an entrepreneur you keep in mind the following points that will be seriously considered by your source of capital, whatever it may be:
- The approval of an investment loan depends above all on the way you present your business project . Doing it seriously and professionally will help you get a positive response.
- It must include complete information on the legality of the business and on the guarantees that you offer to replace the borrowed capital.
- You must have a good banking record and this includes an excellent record in the use of your credit cards.
- You must have an excellent work history.
- You must have experience and knowledge in the field where you will develop your project. This may be applicable for your partners.
- You must clearly state the amount of money you require and describe in detail how it will be used and invested in the business, thus guaranteeing a return on profits.
With these tips in hand, I am sure that you will be adequately prepared to go and seek the financial help you need to start your business or take it to new heights.