All but a select few business startups will rely heavily on loans to get their enterprises off the ground. Those lucky enough to self-fund their new ventures are few and far between, so you will need to convince those willing to lend of the viability of you and your business.
But what are your funding options and how can you increase your chances of getting that all important cash injection? The following 6 steps go some way to answering these questions:
Whatever fundraising avenue you elect to pursue it goes without saying that everything about you and the business you want to launch should be as professional as possible at all times. Know what is and isn’t considered good etiquette when in dialogue with funding providers or investors. For example, it’s not disrespectful to follow up with a potential investor even if he or she has said no to you before. But it would be to hound this person with no new information or compelling reason why they should change their mind. Doing so will reek of desperation and all but rule out any chance of an investment. A more polished approach and one more likely to result in success would be to thank them for their time and follow up in a few weeks when you’ve had time to gather more information and adjust your business plan.
Acknowledge that raising capital is a long-term goal
Launching a business is an exciting time and you’ll be eager to start working on the idea that you’re convinced is going to make you money, but you need to appreciate that you’re very unlikely to secure funding overnight. Raising capital can be a long-term process, so patience is hugely important. Don’t let over-enthusiasm threaten your chances of closing that all important deal.
Don’t be despondent at initial rejection
Many business ideas are not backed immediately and endure a difficult road on their journey to securing funding. Take heart from the fact that many entrepreneurs whose businesses have gone on to accomplish great things were in your shoes once and are likely to have encountered rejection before gaining approval eventually. Try and stay upbeat even if your idea is met with a lukewarm response initially.
Evaluate all your options
Know the funding routes that are open to you and be willing to modify your strategy if one looks more promising than another. Raising business capital is not only about angel investors or private lenders. Your options are not just limited to high street banks either, as there are organisations out there that are willing to lend money to startups based on the strength of their business plans rather than credit or trading history. Crowdfunding sites like Kickstarter are another option that has gained popularity in recent years.
Choosing the right channel, or combination of channels, in your efforts to secure funding could increase your chances of success.
Continually review your business plan
Use funding rejection as an opportunity to learn and examine the strengths and weaknesses of your business plan. Take on board comments and use them to make improvements. Addressing flaws that have been identified by potential investors or lenders will make you more credible and your idea more attractive to the next person you pitch your idea to.
Optimise your pitch
You should be able to concisely explain your business concept and why it’s a valuable investment opportunity within the space of a minute. If you can’t, refine it so that it’s strong enough to capture the attention of the person you’re pitching to and points towards a viable business plan.