How Business Owners Could Fund Their Start-ups?
Money is essential for many companies and before we go into business, we should make sure that we have enough money for at least six months of business operations. If we think about expanding our business, it is a good idea to make sure that our second branch can be sustained by our first branch. This would be a much better thing than borrowing money in the bank that can cause us to pay interests and fees. Our growth should be based on profits and it should be possible to be successful in the business world by starting low. Profits and positive cash flow should be obtained by low-risk operations. If we need money for our business, we should be aware that all the start-up money should come from sustainable sources. If people give us the money, it should be considered as the “love money”. They give the money because they love us and nothing else. It is not advisable to take out a second mortgage on our home, except we are sure and absolutely sure that our business will deliver good returns. Whatever happens, we shouldn’t borrow cash on our credit cards, because the interest rates can be incredibly high.
Many banks won’t provide money for completely new business start-ups due to high failure rate. Banks won’t be in business too long if they take too much risks. They make money by providing loans for companies that can ensure good profitability to allow them to repay the loan along with the interest. Banks can make the margin, by making sure that we repay more than what they lend us. To further strengthen their positions, banks also need collaterals and they could require up to five time collateralization when lending us any money. It means that no matter what our background or who we are, the bank will make sure that we have five dollars in assets for every dollar we borrow from them. They will scrutinize our business and carefully asses our business any ideas. They won’t lend us any money if we have bad business ideas and insufficient collaterals. It means that we need to be outstanding salespeople, not only to our potential customers but also for the bank’s representatives. If not, we are making things difficult for ourselves, because the bank won’t bother considering our loan requests.
In fact, all successful businesspeople have remarkable capacity of selling their business ideas to banks and potential partners. It is a big mistake, if business owners think that others are the one who do the selling for them. Advertising isn’t enough to make people convinced about our business, because banks and potential partners would look far beyond our marketing messages. Business owners should be prepared to face cautious and critical bank representatives and it is important to convince them about their potentials. The ability to sell business ideas to everyone is the heartbeat of our business and this could determine our failure or success.