What You Need Before Going to an Investor or Bank

The importance of a business plan

In order to effectively raise capital, every new business idea with marketable potential should always be accompanied by a well-constructed, comprehensive business plan. To create such an extraordinary business plan, new business owners must first organize their thoughts, and then create a documented first draft. New business owners are also encouraged to seek the assistance in proof-reading in order to avoid any errors, which can seriously damage their overall credibility and chance to raise capital. A well-written business plan is the key for new business owners to successfully raise capital.

Many successful entrepreneurs strongly believe that preparing a business plan is similar to writing a resume. The new business owner has to focus on every detail, explain their academic background and credentials, and clarify how their experience could add value to the new business endeavor. In addition to providing several references, the business plan should be constructed in such a way that it leaves potential investors speechless, with no further questions asked. By creating a well-prepared, solid business plan, new business owners will greatly increase their chance to raise capital for their new business endeavor. In addition, their solid business plan will also improve their chance to raise capital throughout the development of their new business.

To further increase one’s chance to raise capital, new business owners are encouraged to seek the help of professional legal consultants or accountants. These professionals serve as a valuable resource to new business owners who want to raise capital since they can provide new business owners with all of the necessary paperwork for their business plan. They can even develop the entire business plan for the new business owner. But before seeking their help, the new business owner must make sure that these professionals are accredited and that they have experience in the field of new business startups. The assistance of accredited, experienced professionals when preparing a business plan will definitely impress investors, increasing the entrepreneur’s chance to effectively raise capital.

Fixed vs. variable expenses

In addition to a solid business plan, new business owners must be able to differentiate between two types of expenses that they will have. These essential startup expenses can be divided into two separate categories: fixed and variable. Once both types of costs are evaluated and a total amount can be predicted. Bankers and investors expect new business owners to know these costs in order to estimate how much capital will be awarded.

Fixed expenses- New business owners need to consider the amount they have to pay for rent, utilities, administrative costs, and insurance costs when they decide to raise capital.

Variable expenses- New business owners also need to take into account inventory, shipping and packaging costs, sales commissions, and other costs associated with the direct sale of a product or service for their new business when they decide to raise capital.

Determine Your Startup Expenses

Once a new business owner identifies the different sources of funding available, they should now determine the amount of money that is needed to raise capital. Startup fees can be rather steep since office expenses (including rent and utilities), research, development and marketing costs, technological expenses, and employee payroll and benefits are considered to be necessary business expenditures. Legal and professional fees should also be considered as well as the basic living salary for the new business owners for at least one year. During a young company’s initial years, all of these expenses can accumulate very rapidly, discouraging new business owners how to productively raise capital. However, with a solid business plan as well as ample industry and funding research, new business owners can definitely increase their chance to raise capital for their new business.

Financial crisis can mean failure

There are many reasons why new businesses do not succeed; however, deficient funding remains one of the significant reasons behind a company’s failure. In fact, all too often, the amount to raise capital for a new business can be frequently overlooked. In addition, many entrepreneurs with precarious economic circumstances are putting their new businesses at risk for failure simply because they have underestimated the monetary costs of running their new business. Rather than resorting to raise capital elsewhere, these new business owners tend to limit much of their business-related expenses which immediately restrict their new business’ capacity. As a result, this greatly threatens their company’s potential growth and stability.

Seeking financial help from outside sources

If any new business owner is ever in a desperate financial situation and  need additional capital to sustain their new business or to revive their finances, then they are strongly recommended to raise capital from outside sources. This can come in the form of a loan, either from a bank, friends and family, or personal investors, such as an angel investor, who can all effectively raise capital for a new business. Although many new business owners may underestimate their start-up costs, they should not be discouraged about their rapidly growing expenses since many different exist to raise capital. It is extremely important to research all of the different avenues thoroughly in order to become familiar with the various choices and the processes involved in order make a well-planned and educated decision. Education and preparation are the two most important components that will lead new business owners to successfully raise capital.

Secured vs. unsecured business loans

Business loans provide new business owners exactly what they are looking for: the necessary funding to raise capital for their new businesses. These loans are offered as either secured or unsecured debts, which are specially designed to fit the monetary requirements of the new business owners.

Secured loans- If the new business owner decides to apply for a secured loan, they will need to find collateral in order to raise capital for their new business. Personal, commercial or residential properties, invoices, or even recreational equipments can be considered deposits to secure the loan. Secured loans are a popular alternative for entrepreneurs to raise capital for their new businesses.

Unsecured loans- If the new business owner does not want to use collateral as a form of security to raise capital for their new business, they have the option to apply for an unsecured loan.  Even though unsecured loans are not as large in amount as secured loans, this may be more compatible with the new business owner’s needs. An unsecured loan is also a popular option to raise capital for a new business.

In both types of business loans, entrepreneurs are able to raise capital for their new business based on their credit rating.

Different bank loans and online applications

There are different types of loans that can provide new business owners with the means to raise capital. These loans are classified according to the size of the planned business. The most common types are start-up business loans, small scale business loans, large business loans, and new business loans.

Many financial lenders can now offer entrepreneurs the opportunity to raise capital for their new businesses by applying for a bank loan online. Upon application receipt, the new business owner’s information will be thoroughly analyzed for approval or rejection. All the information completed by the new business owner is strictly confidential and is transmitted through a secure server. If the entrepreneur needs an estimation of how much funding is needed to raise capital for their new business or inquires about the costs of monthly payments, they can utilize an online loan calculator which is provided by many financial institutions. Online loan applications are a fast way for new business owners to raise capital.

Government funding and the SBA

Government loans by the Small Business Administration are also considered a valuable source for new business owners who seek to raise capital.  Since their inception in 1953, the SBA has provided a resourceful means for several thousands of new business owners to raise capital. In fact, the SBA has financed more than 219,000 new business owners with loans of more than $ 45 billion. The role of the SBA in providing new business owners the opportunity to raise capital has dramatically increased in the last decade. In the past 10 years, the SBA has enabled almost 435,000 new businesses a total amount of more than $94.6 billion. It is no wonder that the SBA is considered to be one of the leading resources for new business owners to raise capital.

However, before approaching the SBA as a source to raise capital, entrepreneurs should be aware that the SBA does not lend money directly to new businesses, but instead, acts as a guarantor through a network of local lending partners to help promote the startup, growth, and success of small businesses in the United States. Since every new business is different and has its own specific monetary needs, entrepreneurs need to properly estimate how much capital will be needed for their new businesses. Some new businesses can be started on a small budget, while others may require considerable investment in inventory or equipment. It is vital for entrepreneurs to estimate this amount before deciding to raise capital through the SBA.

The advantages of applying for an SBA loan

The advantage of applying to the SBA for startup capital is that it offers more flexibility than other loans that are offered by traditional lending institutions. However, new business owners may not find the SBA an easy source to raise capital. New business owners who are planning to raise capital through the SBA need to meet minimum criteria and furnish details of their business profile, loan request amount, collateral details, business financial statements, and personal financial statements.

Most financial analysts suggest that new business owners should be able to raise capital easily through prequalification. Prequalified capital can be made possible through intermediary organizations which assist prospective borrowers in developing viable loan application packages and securing loans. Many of these preapproved loans are made available to many minority groups.

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Below you will find an overview of strategies that can be implemented cost-effectively to drive patient acquisitions, while increasing your practices exposure online.

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IGNITE your Search Engine rankings through our cost effective optimization plans for everyone from local businesses to national brands. Make sure your clients are finding you or they’ll surely find your competition.

Search Engine Optimization is critical for today’s businesses to keep the competitive edge and maximize their Internet exposure. Creative Capital provides tested methodologies, services and optimization techniques that will increase your website exposure and provide the highest probability of top positioning on all of the major search engines.

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