Finding financing for your company may seem like a daunting task, especially if it is your first time venturing into this field. You may be unsure if you should apply for a loan, use your own money, or even apply for federal funding. With such a wide variety of ways to get funding you may feel like you are overwhelmed and unsure of what you want to do. The most essential tool you can have when approaching people to find money for your company is your business plan. After you have made your business plan, finding financing is the next step.
Some people may have enough money to start their own company without having to approach people for a loan. That may not be the wisest move for them to make. Many people also believe that they do not have enough money to start their own company and so they put off opening their business until they can get enough to open their business. If you find yourself in that position there are a variety of things you can do now to get your business running without having to wait years for you to get enough self funding.
The first step you may want to take is to look for investors. These are people that you can convince to give you money for your company in exchange for a percentage of control in your company or a percentage of profits. The good part about this is you will still be able to keep your own available money.
That money can then be used in other ways than to just invest into the company. The bad news is that if you aren’t careful, you may wind up giving away more control of your company than you are able to retain due to having to take money from these people. If you are to take on investors, always make sure that there is no way that they will be able to have more than 51% control in your company. If they have more than you do, then they have a controlling share in your company and may force your company to head in a direction you would not want. Even worse, they may force you out of the company. If you feel as though that would not be possible, then you may not want to get investors and to search for money elsewhere.
The next step that many people take is to go to their local bank and to apply for a small business loan. The money that you get from there will have an interest rate based upon your credit. Many institutions have government backed SBA loans but they will want you to fill out many forms so that they can verify that you are going to use the money to start up a small business.
Be prepared to bring many financial documents both commercial and personal as well as a copy of your business plan. The good news is that after you have finished completing all of the required forms and producing all of the information that they need, your lender will send off your application to get processed by the government. This could take a while though but it would give you time to finalize your business ideas.
You could also apply for a personal loan for your business but this will not be backed by the government. This is recommended if you feel you cannot wait for the government to process your loan and you need the money now. The interest rate varies and you could end up paying more for this loan than for the government backed one.
There are also government loans based upon your background, location, and the type of business that you are planning to open. These can be quite competitive. You may also want to check your local non-profit organization about getting loans for your business. Some states and cities also give loans to companies that are willing to start small businesses inside of their limits.
The last thing you should do when opening your own small business is to use your own money. Invariably when you open the doors to your company, you are going to realize things that are wrong. It could be something simple such as needing a new sign for the window to complicated things, like needing to install a rotating door. That is where your money will come in. After the building has been financed and the major purchases have been made you can use your money. If you use the loans that you received earlier for your company, you will be wasting the loan. It will also be useful when applying for one of the loans because the more money that you are able to have on hand or in the bank, the more likely the bank is to loan you the money. If you use all of your money before to finance the building or purchase equipment and then apply for the loan, the bank will see that you have no liquid assets. That will raise their wariness about loaning to you and may cost you the loan.
There are many different ways to go about finding financing for your new small business . The most important thing is to get as much information as you can and to build up your assets before approaching anyone to invest into your company.