Having a good idea is not enough to become a successful entrepreneur. You need to be able to kick-start your dream. And when it comes to finding finance, you have options – you just need to know where to look and who to approach.
First things first
A business plan looks at the bigger picture and helps you to construct a strategy for the future. Without one that’s been researched thoroughly, you may have difficulty accessing finance. A good business plan is vital because it forces you to talk through key issues. It also helps you analyse who your customers and competitors are.
Before you borrow…
In an ideal world, you’ve already saved up all the cash you need to start your business. Unfortunately for many of us, starting a business will mean borrowing. The problem with borrowing money is the paying-it-back part. When you approach a bank or funding organisation, it will require security or surety from you. Your first stop in borrowing money should be ‘friends and family’.
It’s who you know
Friends and family are more likely to invest in you as a person, rather than in your business plan. But if you’re planning on asking the people closest to you for money, you need to know the risks and rewards first. Friends and family will probably offer you a more flexible arrangement for repaying the loan at little or no interest, and this should negotiated upfront. You’ll need to set up a contract – between you – no matter how informal to prevent awkwardness or even bitterness down the line. Know your sponsor’s expectations and ensure you communicate when you’re winning, and especially when you’re struggling to pay an installment on the loan.
Where else will you find someone to invest in your business? Leave it to the Angels. Angel investors are people who have already established their careers and made their money, and who have retired and are willing to fund or mentor up-and-coming business people.