How to Fund a Business

Research and create a business plan before approaching lenders.

Getting a business off the ground often is a matter of securing enough funding, since many businesspeople don't have enough money of their own to cover starting and operating costs. Banks are just one source of funding, so you have more than one option for finding financial backing for your enterprise. These steps are not complex, but they do require significant time and analysis. Taking the time to complete the steps properly may mean the difference between substantial revenue and never being able to open your business.

Instructions

1. Research your business market by doing on-site investigations of other businesses, reading business publications and looking at the websites of similar companies. Take notes of pertinent information and the sources of the data.

2. Write a business plan. Every lender or investor wants to see the business plan to decide whether your business is worth funding. Include specific information in the business plan such as exactly how you will use the funds, what niche your business will fill and what goals you have for the business, how your business will be different from others, how you plan to repay the funds and what collateral you have to offer, the risks associated with your business, and why you are qualified to start or run the enterprise.

3. Take your business plan first to potential donors and investors. Call ahead for presentation appointments and pitch the business during the meeting. Approaching donors and investors before approaching lenders reduces the amount of funds you have to pay back. Stick to local donors and investors if you can; they may be more likely to invest in the community by supporting you.

4. Visit websites such as grants and federalgrantswire to find grants that might support your business. Contact the organizations for each grant and request applications and the name of the applications secretary. Fill out the grant applications according to the organizations' guidelines. Send a copy of the business plan with the application to each grant organization.

5. Call your bank and request a meeting with the business loan officer. Pitch your company to the officer during your meeting and provide her with a clean copy of the business plan. The AllBusiness webiste recommends preparing for the loan interview with the five Cs--character, capacity, collateral, capital and conditions. Character refers to your reputation. Capacity refers to the net worth of investors, including you, as well as to liquidity and assets. Collateral is something of worth the lender may claim if you fail to pay back the loan. Capital refers to how you have structured the use of the funds to minimize risks. Conditions detail what you know about your industry and the economy as it relates to your business.

Tips & Warnings

• Do not wait until after you start your business to act professionally--dressing and behaving professionally during meetings with investors and loan officers creates an impression of how you run your business. This can impact the willingness of lenders to provide funding.

References

• AllBusiness: How to Get a Business Loan
• Grants: Business Grants
• Federal Grants Wire: Homepage