An entrepreneur has numerous funding opportunities to raise business capital for
his/her startup. It is important to conduct a fair amount of research in order to
choose the best funding option
available since a poor selection can greatly jeopardize the future of a company.
Some criteria for obtaining business capital from any source (angel investors, commercial
bank loans, and government loan programs) is a comprehensive business plan, good
credit history, and strong commitment to stay debt-free. By understanding the significance
of these 3 components and complying with such standards, the new business owner
will soon be on their way to obtain the
needed startup funding.
Business plan
One major necessity of most professional lenders is a comprehensive
business plan.
This plan must detail the products and services offered as well as the company mission
statement. More importantly, it must include financial forecasts on how the new
business will stay financially sound throughout its early stages. By including these
three essential constituents in a business plan, the business owner will gain credibility
from financial lenders and/or investors since their
business ideas and goals are organized accordingly.
While all
business plans that are presented at this stage are only prospective outlines,
it will most likely change according to an investorâs input and advice. In addition,
most business plans will often be modified and/or changed throughout a companyâs
development. The key to any successful company is the implementation and obligation
to follow a companyâs business plan.
Credit history
Along with a good business plan, the entrepreneur should also have stellar credit
to be considered for funding. This is important to many financial institutions and
private investors since it shows
an entrepreneurâs ability to pay off debt. However, before approaching any professional
for business capital, the entrepreneur is encouraged to view their credit history
first, and then attempt to repair any discrepancies.
Since it is a proven fact that prospective borrowers with a solid credit history
are taken more seriously than those with poor credit, it can certainly work in favor
for an
entrepreneur, especially when they are trying to convince lenders that their
investment will be low risk. It may also help if an entrepreneur has established
a good personal relationship with credit rating firms who can easily assist in changing
any inconsistencies that may exist.
Debt-free commitment
One important obligation of all entrepreneurs who
seek funding is their commitment to stay debt-free. When given the opportunity
to raise capital from professional lenders/investors, the business owner must make
a promise to themselves and to their lenders to repay any debt owed. This personal
dedication to seek any and all possibilities to be debt-free provides personal motivation
to make the business a success.
Conclusion
If an entrepreneur has great business acumen, then
finding funding for their new business will not be problematic. The ability
to effectively raise business capital is crucial to the stability of a new company;
therefore, new business owners should have three important aspects in mind. First,
they should have a comprehensive business plan, which outlines their company objectives.
Second, they should have a good credit standing, which is indicative of their repayment
history. Should they not meet the first two criterions, they may already be at risk
for rejection from lenders and investors. The last important criterion is the personal
promise to pay back any amount of money owed. By researching
different funding options and meeting these three conditions, the new business
owner will greatly increase their chances of raising capital.
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