Finance for Startups – Ways to Circumvent the Red Tape

Finance for startup

Finance for startup

It may come as a shock that around half of businesses no longer exist after five years. What may be even more of a surprise, is that half of these businesses don’t survive due to a lack of funding or mismanagement thereof. This makes it tough from the outset to get the business off the ground and bootstrapping may not always be possible. Finance is the next best thing to launch your venture, but getting it in place is not as easy as it seems. Here’s how to get things moving in the right direction.

Know What the Investors or Financiers Want

There is nothing more frustrating for an investor or financier than meeting with an entrepreneur who can’t talk numbers. This means having a keen understanding of the financials of the business and in the case of a startup, the cash flow projection. They need to see that the entrepreneur has their finger on the pulse and that the financials are top of mind. They will also need to know financial jargon such as break even, ratios, and margins.

Be Willing to Add Personal Finance to the Mix

It’s not enough as a business owner to simply sit back and expect outsiders to fund the business. It’s important that the business owner shows they’re vested in the business and own contribution or owner’s equity is what outsiders will look for. They want to know that the owner is willing to take on some of the risk. Owners raise this capital in their personal capacities and this is done through savings, retirement funds, accessing the equity on their properties, or raising capital through a personal loan.

Spend Enough Time Doing Research

Startups are known to gobble up resources in low supply such as time and money. Those who wish to make the startup journey a successful one need to be willing to put in the groundwork to get things going. This means investing in proper market research such as conducting a feasibility study. Once this is in place, the information is then translated into the business plan. These two documents form the backbone of every new business and without them, entrepreneurs find it difficult to keep track of the business milestones and progress. These documents also show investors and financiers what the business is about and whether it’s something they would want to get involved in.

There are other ways of securing finance for businesses that may not require the traditional routes of lending, such as crowdfunding. Those who prefer the traditional route will find that getting the basics in place goes a long way.

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