Question: I have what I think is a great business idea. It is for a business that is unique to my city, and one that I think will do well. How do I go about putting a business plan for funding? How can I get my bank interested in funding my business? – Susan D. (San Diego, California)
Congratulations on your decision to start a business! Having a business idea that you think is unique and with potential demand is a great first step to successfully starting a new business.
Unfortunately, it is not easy to get funding for a new business — even if the business idea is excellent — especially given the tough economic situation we are in.
Getting a lender or investor interested in a business goes over and beyond the idea. In most cases, an excellent business idea is not enough to get investors and lenders to open their pockets to support your business.
In the eyes of the banks, for example, you first need to show the following before they even read your business plan:
- your ability to repay the loan
- your collateral
- your assets
- your credit history
- your management team (you need to prove that you can execute this business well and having someone on board with experience can help)
Having a business plan is good, but it is not enough. As disheartening as it may, banks will not even bother to read your business plan if your credit is poor and you have no collateral or assets. This is even more true during these tough economic times when credit and small business lending remains very tight. You will need to make sure that you — and the business you want to start — that you really prepare for it and think through potential questions that bankers will ask.
To attract investors (including angels) , remember that your idea alone will not sell itself. You need to meet the requirements of having good revenue and profit (or revenue and profit potential), a defined market opportunity, a solid management team, intellectual property, and a reasonable valuation. These are important elements that you need to specify in your business plan.
To write an effective and winning business plan, backup your claims with solid financial projections and metrics, including but not limited to number of users, user growth, costs for expansion and so on. Know how much capital you will really needl and develop winning strategies to ensure its growth and continued survival.
When looking for financing, look beyond the banks and the investors. An alternative for funding a business startup nowadays include hcrowd sourcing websites . Crowd sourced capital,” crowd funding provides the collective cooperation of people willing to pool their money to support projects, activities and businesses that interest them. Here’s a list of crowd funding websites.
Good luck to you!