Have a clear business plan and back it up with plenty of evidence and statistics to support your appeal for funds. Right from the outset, you should be setting out your stall as clearly as possible.
You’ll need to explain what your product or service is all about, why you think people will want to buy it and at what price. The more you can bolster your bid with stone solid facts, statistics and maybe some case studies – based on what competitors have achieved if your business is not yet up and running – the better.
Think about who your competition will be and how they might respond. Is there room for another business providing the products and services you want to offer? Always be realistic but don’t forget, if you can do something better or differently to what’s out there, or available in your area, you can create a market. Quality service and value for money will always be well received.
Other things to cram into your bid include the estimated size of your market, how you intend to reach your customers and as detailed a financial projection as you can. This is worth spending a good amount of time on, to make sure you get it right.
Try to accurately estimate your profits and detail the costs you expect to accrue. Work out the starting capital you will require, as well as your ongoing working capital requirements. Show how you will go about paying costs and overheads until sales have started to build up, and remember to allow for delays in customers settling their accounts… that’s if you’re not a cash business.
Naturally, whoever you choose to approach for financial help will want to know when they will get their money back, and how. So make sure these are questions you have the answer to.
Try to give prospective investors a clear idea of who you and your team are. Spend some time drafting a little background on yourself and your co-founders, complete with details of any relevant experience and qualifications you have.
Finally, give some indication of how you will put your resources to work for you – how will you recruit staff, develop skills, obtain products and technology, and go into manufacture.
Now you are armed with a brilliant business plan, where do you go to find the cash you need? If TV’s Dragon’s Den isn’t a realistic option, here are some more down-to-earth ideas to think over:
Equity: your funder gets a share in the business, a share of the profits and probably a say in how it’s run, but you only repay the funding as the business becomes successful and can afford to.
Debt: A loan, in other words. You’ll pay interest, but only until you’ve paid the borrowing back.
Bank loan: The banks do still lend to small businesses but it is tough to get support for a start up and they will only support those they perceive to be a low risk, so your projections will need to be very solid. There’s also a good chance that your bank lender will require security over your assets.
Bank overdraft: If you are already up and running and you have a good financial track record, it might be worth asking for an overdraft to provide the working capital you need to expand. This is useful for buying stock, offering credit terms to customers or paying suppliers and staff.
Start-up grant: These are often relatively small amounts of money, but this could well be enough for a first-time entrepreneur.
Business angels: these networks of professional investors can offer a great way to get larger equity investments.
Peer to peer lending: This can be in the form of either debt or equity and it is where large numbers of individuals provide usually small amounts of loan or equity funding. It is still important to articulate a clear proposition and business plan in these arenas though as you will need to excite would be investors.
Whichever funding avenue you decide to pursue, remember to have confidence in yourself and your business idea. The best way to achieve that, of course, is to surround yourself with information. There will be lots of questions – do everything you can to ensure you have the answers.
