Getting More Finances for a Business

Finding the necessary business capital
to market a new business idea
or expand an existing enterprise can be a daunting task. Likewise, meeting with
bank officials or venture capitalists to obtain such funding can be quite difficult
in itself. This is exactly why an entrepreneur needs to be thoroughly prepared before
meeting with prospective lenders and
investors
.

Banks versus venture capitalists
Most banks and
venture capitalists
go through thousands of business proposals every
year. Both are interested in a company’s potential success; however, most banks,
large and small, tend to focus primarily on the financial prospects of new business
proposals since it is indicative that the money loaned will be paid back. While
large return on investments is very enticing to
venture capitalists
, they tend to
concentrate their efforts more on the novelty of different business proposals, especially
those in high-tech fields.

In order to satisfy the financial requirements of most banks, the entrepreneur needs
to analyze the overall prospective financial performance of the company and provide
estimated financial figures. These financial forecasts will enable the entrepreneur
to convince lenders and investors
there is a need for business capital and that their new company would indeed be a profitable venture.

Between the banks and
venture capitalists
, VC’s tend to take longer in the decision
making process since they are involved in the profession of investing other people’s
money. They are also known for having a very regimented due diligence process in
which they utilize the help of hired professionals, who perform background checks
on the company founders, in order to make a conclusive decision.
VC’s
also tend
to invest larger amounts of money in a given venture compared to banks and are known
for their investments in later-stage enterprises.

Government loans versus angel investors
An
entrepreneur
who requires only a small amount of capital can tap into the Small
Business Administration for funds. Loan programs of the SBA are usually made through
local banks and though competitive, can work in conjunction with other capital resources
to meet startup requirements. In order to be considered for a government loan, the
borrower must provide the prospective SBA loan program with their complete business
profile, information on how the loan money will be allocated, descriptions on any
collateral that may secure the loan, and personal and business financial statements.
A formal written loan proposal must be presented, and the amount of a loan is based
according to the SBA’s
small business
size standards.

If an entrepreneur seeks more
startup capital
, then they may opt for choosing angel
investors to properly meet their startup needs. As with government loan programs,
angel investors also expect a formal loan proposal describing the company at hand,
the products and services offered, the amount of money requested, and the amount
that the entrepreneur will contribute. This business proposal should be reviewed
by professionals before approaching
angel investors
because a fine-tuned business
plan will greatly strengthen the application, as well as influence a business investor
to reach a favorable decision.

In addition, the entrepreneur should also have a flawless pitch when meeting with
prospective investors. Before
the meeting, the pitch should be perfected by repetitive rehearsal in front of an
audience at all times. A favorable pitch can mean the difference between being rejected
for angel capital or securing another meeting with investors. While the prospect
of obtaining immediate funding may sound like an attractive option,
angel investors

will often expect ownership stake in a company, a seat on the board, and a large
ROI in return for their invested money.

Conclusion.

An
entrepreneur
who is seeking capital resources for his/her startup or expansion
of an existing business needs to show both the lenders and investors that his/her
capital will be put to good use. Regardless of which single or joint funding option
the
entrepreneur
chooses, s/he will need to convey to bankers and

Source

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