Raising capital is the most basic of all business activities, but it is often a complex and frustrating process. However, if you have studied and planned effectively, raising money for your business will go as smoothly as possible. Start your effective planning process with Butler Consultants.
Personal Savings: This is the primary source of capital for most new businesses.
Friends & Relatives: Many entrepreneurs look to friends and family when starting a new business. This can be a great way to get funding for a reasonable interest rate.
Banks & Credit Unions & SBA: This is the most common sources of funding. With good financial projections, a bank will provide a loan if you can show that your business proposal is sound.
Angel Investors & Venture Capital firms: These individuals and firms help expanding companies grow in exchange for equity or partial ownership. This is a great source of funding and knowledge.
It is important to remember that banks make money by lending money. Less experience and new businesses will likely require harsher lending terms. Requesting a loan when you are not properly prepared suggests that you are a high risk. To successfully obtain a loan, you must be prepared with a business plan and financial projections. You must know exactly how much money you need, why you need it, and how you will pay it back. You must be able to convince your lender that you are a good credit risk.
There are two basic types of loans: short-term and long-term. A short-term loan is generally due within one year. These loans include working capital, accounts receivable, and lines of credit.
Financial statements - provide balance sheets and income statements for the past three years. If you are starting out, provide a projected balance sheet and income statement.
When reviewing a loan request, the lender is primarily concerned about repayment. To help determine its likelihood, many loan officers will order a copy of your business credit report from a credit reporting agency. Therefore, you should work with these agencies to make sure they present an accurate picture of your business.