Updated: Aug 26, 2022
There are a variety of ways to fund a business, and most entrepreneurs agree that none of them is simple. Fortunately, smart planning may make the process go more smoothly. Before you start looking for seed money, there are four most prominent things you should do.
Boost your personal credit rating
Organize your own money. Whether your cash come from loans or investments, you'll need proof of your financial management skills. You won't have a profit and loss statement (P&L) to demonstrate your financial knowledge and organisational abilities as a company. That information hole will be filled by your own credit history.
Raising your credit score takes time, so prioritise it on your fundraising priority list. According to financial expert Suze Orman, the aim is to have a superb credit score of 740 or above. An excellent credit score demonstrates your commitment to meeting your financial responsibilities. There's also a benefit to having your personal financial house in order: it'll offer you one less thing to worry about as you deal with the stress of starting a new company.
Have a killer plan
Preparing a thorough business strategy takes time and effort. The fact that you took the time to create one will impress potential lenders and investors. A business plan, in addition to describing your objectives, can assist you in determining how much cash you require and how fast you can return it - two critical pieces of information that any lender will require.
It makes excellent business sense to have a plan. According to Cranfield School of Management Professor Andrew Burke's research, a well-written business plan may boost a company's growth by 30% on average. He recommends concentrating your strategy on adaptation, sustainability, and capitalising on opportunities in your target market.
Concentrate on the numbers.
Potential investors want to learn everything there is to know about your great idea. They want to sense your enthusiasm, witness your work ethic, and hear about your plans for the future. Above all, they want to know if you'll repay them or create money for them. Numbers - financial facts — are the best method to demonstrate that your mind is in the right place.
Richard Harroch, a venture capitalist, recommends making financial estimates for at least three years. Your expected P&L and balance sheet are more significant to him than a lengthy business strategy. Make precise estimates regarding expenses, margins, overhead, and the costs of product development. All of this is done to see if your company concept is viable before pitching your first investor or filling out your first loan application.
Make sure your pitch is perfect.
All of this planning was building up to one thing: requesting funds. You need a short, compelling story whether you're presenting to a room full of venture capitalists, meeting one-on-one with a banker, or casting a wide net through a crowdfunding site.
Entrepreneurs should pitch the transaction rather than the business, according to Alex Kenjeev, president of O'Leary Ventures. Consider yourself on the investor's side of the deal and respond to the questions you would have. A strong proposal demonstrates that you understand that individuals who donate funds expect to be reimbursed.