My good friend works for the investment company FourCreeds, and he often tells me funny stories about people who have come in seeking financing but don’t know nearly enough about their business to secure it. We were just talking about it the other day, which is why I wanted to write a fast piece on what you should know before meeting with an investor, venture capitalist, or even a bank to pursue funding for your company.
What is the cost and why
When you know you’ll need money to start a company or finance a project, the first decision you’ll have to make is how much money you’ll need. Finding out what you’re doing with the company, what costs there will be, how much money you have on hand now, and what that money will be spent on, penny by penny, is the easiest way to find out how much money you’ll need. If an investor asks why you need $10,000 and all you have to say is that you want to expand your company, you will be laughed out of the room. If you can say that you will spend $2k on analysis, $3k on marketing, and $5k on personnel or development, you will be able to provide them with details that will support your request for funds.
The State of the Company
Investors still want their money back, with a little more, which is why they won’t put their money into a business that isn’t in good shape. This is why, if you are trying to raise additional funds for an established company, you must first consider the current state of the business. Every part of the business should be in your mind or on a sheet of paper in your hands, including how many units you sell, how much money you raise, and how much money you owe. If you can’t tell anyone what’s going on in your company, they won’t be interested in investing in it, so make sure you know your numbers.
Return of funds
Investors, interestingly enough, still want to know if they can get their money back, so this is something else you should be prepared to discuss. You should have already plotted out a conservative financial strategy for the next 5 to 10 years, as well as where the repayments fit into that plan. Many business owners do not have a solid grip on the facts and statistics, which is why you should always seek the assistance of a management consultant or accountant when checking these figures to ensure that they are correct.
Get your credit report in order.
If you get your fund from bank, your credit report must be clean. Sometime your credit report can contain errors, which can have a negative impact on your credit score if you are not careful. This is why it’s crucial to keep track of your company and personal credit files on a regular basis. If you find any mistakes, contact a credit reporting agency right away to correct them and increase your credit score; otherwise, a bank will not accept you for a loan if your credit rating is poor.
Maintain accurate financial records.
When you have proper financial statements, getting a business loan from a bank becomes easier. Banks will still want to look at your balance sheet, cash flow statements, and income statements to see if you’ll be able to pay back the loan. This means that if you haven’t been keeping these documents, now is the time to start because they will come in handy when applying for a loan in the future.
Do your homework, brush up on your skills, and then ask for money.
Zeeshan S is a contributing author of FourCreeds. He has been passionate about business n marketing. He wrote many articles about business strategies, business startups. Articles are written by him always help the entrepreneur n small business owner who wants to get success on their investments.