Financing your startup business

What's standing between you and starting your own business? If it's a lack of money, this can be remedied with a number of reasonable startup capital options available to aspiring entrepreneurs.

The key is planning- your financing strategy must make sense to both you and your prospective lender. Here are six steps towards building a sound financial foundation for your startup.

Identify your needs

Estimate what you will need to launch and sustain your business. This includes equipment and supplies, inventory, office or manufacturing space, franchise fee, and so on.

You should then consider what portion you can reasonably provide from your own resources, for example savings or contributions from family or friends.

Be careful in identifying your needs as you don't want to over or underestimate your them, nor do you want to endanger your family's financial security and your family relationships.

Look at the options

Commercial banks are the most visible lenders to small businesses, offering a range of conventional loans. You can also look to venture capital firms, commercial finance companies, angel investors, and so on.

Be sure to learn as much as you can about the evaluation criteria and payback requirements for each. You should also explore the range of Federal government or state grants there are available for your type of business.

Build your case

Most lenders require the following:

  • Business plan
  • Resume detailing your education and practical business experience
  • Credit history with references
  • Specific loan documents

Develop your business plan with sections describing the nature and type of your business, available resources and how they will be used to meet specific goals, timelines, financial objectives, analyses of your competition, and how your business will fit in the marketplace.

Fill in the blanks

Lenders may also request cash flow projections that illustrate both the viability of your startup and your ability to repay the loan. Remember that the data plan needs to be realistic and supported by facts to validate your estimates and projections. Don't cut corners on research.

Practice your pitch

Every request for startup financing will involve some sort of presentation. Even if you are comfortable in these situations, organise your thoughts and practice with people who will provide objective feedback. Fielding any and all types of questions ahead of time will build your confidence and prepare you for any issue that may arise.

Ask questions

Talk to your potential lenders about their processes and loan expectations. Your local small business hub and business support network can also have a wealth of resources and experts to guide you through the steps of startup financing.

By All Business

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