Funding & Investors
The various forms of financing available to companies – debt & equity financing – are discussed in detail in the funding section of the business plan. Funding is also obtained from the various commercial finance programs offered by the government, including the Small Business Administration and the Small Business Development Agency. Financing is provided by local, state and federal agencies as well. Private funding is taken from the various banks and other lenders, who usually have to seek the approval of the funding company before approving a loan.
When you are looking for funding sources, it is important that you choose a source, which is both reliable and trustworthy. The first step in finding potential funding sources is to do your due diligence, i.e. investigate all possible sources for obtaining funding. You can conduct this research online or by contacting non-profit organizations that provide funding counseling to startups and small companies. Most of these organizations will suggest sources of funding for your venture.
Once you have shortlisted several viable funding sources, you can contact them and explain your requirements. You should be prepared to provide a detailed business plan along with financial projections and management information, to show that your company is solvent and has the capacity to pay the required funds. Be prepared to give a copy of your credit report to the funding organization, as they will conduct their own verification. Funding investors may take up to two weeks to process the information and finalize the funding.
There are also many angel investors out there who help startups obtain access to a number of capital funds. Angel investors are usually wealthy individuals who provide funding to promising companies on the basis that the company will turn around and generate profits for them. However, since it is difficult to determine the probability of a company’s turnaround, these funding sources are often a great deal for startups and small companies, but not for large and mature enterprises. It is important that you find a reliable source for obtaining seed funding from an angel investor. Since most of these investors do not make themselves known, it may be difficult to find a funding entity by yourself.
Private equity firms are another option available for raising capital for your business. These funding sources are made of highly experienced entrepreneurs who understand the challenges in running a small business. Their experience ensures that the startups that they invest in will get the help they need from these firms. However, as the name suggests, there is always the risk of the venture going bankrupt. Hence, before deciding on going with this method, it is essential that you verify the credentials of the private equity firm by conducting a thorough research. Make sure you know exactly why the firm is investing in your startup, what the benefit is that you can derive from the investment and how they plan to return the fund.