If you have recently joined the ranks of the jobless or you grow tired of the rat race and know you can do better on your own, it might be time to cash in the brilliant business idea cooking in your brain. Depending upon what you want to open, your business could require a bit of start up capital. Since it is not 2005, and you need more than a pulse to secure a loan, money is tight, regardless your industry. That just means that you have to work a little harder to find institutions and investors with full pockets. Running your own business is never going to be easy, so don’t let this mild speed bump derail you. Here are some tips to build your confidence and gain that cash.
Have a plan
In basically all of our small biz articles we have harped on the importance of a business, and this one is no different. Investors will want require a plan for a couple reasons. First, they want to know what your business is all about, how it makes money and when they will see a return on their deposits. It is equally important, though, to demonstrate that you have spent some time researching your business and industry and have given thought to a variety of scenarios. Presenting your plan is a great opportunity to convince potential money partners that not only is your business a good idea, but you are the man that deserves cash to start it.
Ready your elevator speech
You never know who might be interested in unloading a little inheritance on your idea. Having a polished 30 second spiel about what you want to do means you won’t miss an opportunity to pique the interest of a potential source of capital. Maybe at a BBQ you’ll chat with an unexpectedly wealthy friend or converse with a distant cousin a family get together. Regardless the venue, you don’t want to be bumbling when asked about your start up; you’ll look very amateur, and probably receive a polite, but fake, nod of approval from listeners.
Be prepared to give a little
If you plan to go the bank route, money is available, but it does not come for free. The Small Business Association guarantees all or parts of bank loans to, you guessed it, small businesses, but not all banks offer this lending. All will, however, require some collateral. An SBA loan will almost always require some real estate to back the loan. The riskier the loan, the more personal guarantee you will need to provide whatever financial institution is lending money, in the form of your house, stocks, your first born, etc. Money does exist here, but you will need to provide an excellent business plan, good credit score and clean tax history in addition to the collateral. This process can be lengthy, but, if you are prepared for the sacrifice and grind, fruitful.
Research industry lenders
There are many lenders out there that specialize in specific industries. These folks understand risk more minutely than a bank can, because they are in it every single day. They are often an excellent source for start up companies, because these investors understand your plight and can actually be reasoned with, unlike an inhuman bank. Do not expect, however, cheap money. The individuals or institutions do not have the stores of money banks do, and thus, will likely be a more expensive lending source. But hey, if you need the money, you need the money.
Know what plan has a chance of getting money
One of the best ways to raise money is to need less of it. If you have a grandiose plan that requires 4 employees and $1.5 million in capital, you better couple it with some serious experience and collateral if you want investors to consider you. However, if you take that plan and reduce it to a single employee, and $300k in capital, that may be more appealing. Obviously, your outlook has drastically changed, but a simple start where you build into demand might seem safer to investment groups. They would certainly have less money to lose. Similarly, know that certain industries are marked as doomed for start ups, like new restaurants. You are hooked on operating a great a restaurant, but cannot get anyone to listen to you. Why not consider a coffee shop? This requires less capital, comes with less risk, and you are still serving retail customers in an environment you create and control. That is a pitch that will sell. A little research and understanding can put you in the best position for success.
You do not have to be a slave to the man, you can venture out for yourself. The recession may be an ideal time to start your business with deals on rent, equipment, etc available, provided you can find the money. People will always need good investments, so make sure you are prepared to show them yours. Research, rehearse and don’t be afraid to seek out multiple and unique sources of funding.