How do I get funding for my Small Business?
Almost every small business starts off with the same quandary: Where do I get the money I need to set-up my business?
Securing funding can be your biggest challenge when starting out, but it can also be the first real test of how robust your business idea is.
If you’re trying to convince someone to invest money in your idea, they have to believe you will succeed.
Failure to immediately secure funding may be an early indicator that your idea may need fine tuning. Of course it’s best to have all of your ducks in a row before seeking funding.
Here are our 5 tips for getting business funding.
1. Understand how much money you need
Do you know how much money you need to start-up? What money do you already have? How much is needed for set-up and running your business until it can make enough income to sustain itself.
You need to include all costs from equipment, premises, licences, salaries, supplies, utilities and marketing to your loan and interest repayments. You should also make provision for a contingency fund or unexpected overruns.
2. Investigate your options
Consider what funding options may be available to you. Generally speaking there are four options:
- Debt finance – this is where you borrow funds that you pay back with interest within agreed time frames, such as a bank loan.
- Equity finance – is where a person or entity provides funds in exchange for partial ownership.
- Crowdfunding – this relies on people to donate money and share networks and resources to support a particular project. The donors may be rewarded with a range of options such as free products or even just public acknowledgement.
- Financial grants – you may find that you or your business may be eligible for financial assistance from your local, state or federal government. In Australia you can search for available grants using the Australian Business Licence and Information Service (ABLIS).
3. Obtain professional advice
Every type of funding has its advantages and disadvantages, so it’s critical that you seek professional advice from a qualified financial professional or accountant.
These experts can review your business plan and financial projections and give you valuable feedback as well as a realistic picture of your financial outlook.
4. Apply for funding
You should present yourself in a professional manner when applying for a bank loan or approaching potential investors. You should also come well prepared with information to support your application. This should include (though is not limited to):
- Your business plan
- Your financial projections
- The amount of funds you require and how they will be spent
- Your proposed repayment plan
- Records of existing loans and assets
- Tax returns.
If you’re unsuccessful in your funding application, you should ask for honest feedback and then go back and finetune your plans if possible.
You may then consider reapplying or applying for funding through another source.