Regardless of how good your idea is, or how potentially profitable your business, getting the right kind of investment is a tricky process.
It doesn’t matter how much you believe in an idea, if a bank or an investor cannot see it, they will not give you any of their money. Having a brilliant idea is not enough. You have to prove it. Especially in such financially constrained times, your investor has to be completely sure they are not wasting their money.
It may sound strange to have to go through every little detail of an idea that came from inside your own brain, but you will be surprised how one question can send you spinning. It will be the person with the money’s job to catch you out so make sure it doesn’t happen.
What is the market for the product and how much do you expect it to sell? Will there be any competition and how does your idea stand out from the crowd?
Pay your way
You are less likely to get the funding you need if you are asking the bank for the whole sum. Make sure they know how much you are putting into the project of your own money. A bank will be more inclined to give you $200,000 if they see you are putting in around 25 percent of that yourself. If you are in no rush, it will probably be worth holding fire until you have a respectable sum.
Don’t let your past trip you up, do you have any unpaid bills or bankruptcy in your history? Credit ratings and the like can be an easy way for a bank to get one over on you. Instead of trying to gloss them over or cover them up, be prepared to explain them fully and work your way around them. If there is a reasonable explanation there shouldn’t be too much of a problem.
Show your planning
Before you go into a meeting, work out exactly where the money will be going and how you expect your new business to progress alongside that. A bank or investor will be more attracted to the idea of working with you if you have a clear idea of your goals, and how and when you expect to reach them.
Audit and Look professional
You should leave no stone unturned when going through your finances, but look back – have you audited or reviewed your finances every year? This will help you validate your numbers looking forward and also show you have a strong business mind.
Don’t give up
Although it may be hard to take when you believe in a product you have poured your life into, don’t lose heart when get rejected. Many of the biggest businesses in the world had to trawl through hours of stuffy meetings and closed doors until they found what they were looking for. Mentally prepare yourself for this.
Even when someone accepts your business, do not think you will walk out of the office with the money. The process can sometimes take up to six months, depending on the amount of money.
Guest post contributed by Lauren Jones, a small business advice consultant working in Manchester. Lauren works on helping small businesses secure funding to expand and adapt for the current market. Approaching companies like Capital on Tap can also help small to medium businesses be introduced to potential investors, if the product and overall business structure is correct. Image courtesy BurnAway