| > | | | | specials, and sitting back and waiting for the flood of |
| If you are considering a business startup scenario | | | | customers. Advertising can be very expensive and if |
| where capital is required, then you will want to avoid | | | | you don't know what you're doing, you can burn |
| the 7 small business start up money seeking mistakes | | | | through all your available cash pretty quickly. |
| that destroy your ability to secure financing | | | | From the financier's point of view, they want you to be |
| Small business start up money is a highly sought after | | | | able to clearly articulate what you're going to do and |
| commodity as more and more people are trying their | | | | why its supposed to work along with the related costs. |
| luck at self employment. | | | | Lenders aren't typically any good at assessing |
| Statistically, the odds of small business start up | | | | marketing plans, but they can likely tell if one is missing |
| success is less than 20% within a 5 year period. | | | | or grossly incomplete/unrealistic. |
| A large part of the reason for getting your loan | | | | One of the most powerful ways to support your |
| request turned down, and the basic reason start ups | | | | marketing strategy and related tactics is with written |
| end up failing in large numbers in the first place, is the | | | | orders or letters of interest, or letters of intent to do |
| mistakes made when seeking financing. | | | | business with you once you open. |
| Here are my top 7 small business startup money | | | | Mistake #5 - No Rationale For Key Assumptions. Even |
| seeking mistakes. | | | | if you have a plan and realistic cash flow projections, |
| Mistake #1 - No borrower risk. The biggest single | | | | part of being credible is articulating what you're |
| mistake I see with people seeking startup capital is that | | | | attempting to do in a logical and clear to understand |
| they ask a lender for 100% of their capital | | | | format so that someone who potentially knows |
| requirements. | | | | nothing about you're business can follow along. |
| Risk needs to be shared between borrower and | | | | If a request for small business start up money is logical |
| lender. Startup situations, depending on their nature, | | | | and contains well documented assumptions, it |
| typically require the borrower to invest anywhere from | | | | automatically stands out from the pack. |
| 30% to 50% of the total capital required into the deal. | | | | Be clear on how you came up with each and every |
| A personal equity investment not only reduces the | | | | number you represent in your application package and |
| cost of borrowing but also provides some serious skin | | | | why you feel they are relevant to your business case. |
| into the deal that indicates a strong commitment on | | | | Mistake #6 - No Expertise and Support Team. One of |
| behalf of the borrower. | | | | the first questions that goes through any lender's mind |
| Mistake #2 - Purposeful Business Plan. For most small | | | | when someone asks them for small business start up |
| business start up money, a business plan is a required | | | | money is whether or not the person requesting |
| part of the appplication. | | | | financing has the knowledge, expertise, and support to |
| Fundamentally, this is an important requirement for | | | | make the business successful. |
| someone getting into any business. Unfortunately, most | | | | Too often, individuals do not document and support |
| borrowers look at this strictly as an academic exercise | | | | their own expertise relative to the business venture. |
| to get financing with the only purpose of completing | | | | This can be done through a resume, examples of |
| the business plan being to satisfy a lender requirement. | | | | previous related work experience, letters of reference, |
| A business plan should aways be prepared from the | | | | a list of contacts that can provide verbal reference, |
| point of view that the primary benefactor of the | | | | etc. |
| process of creation and preparation is the underlying | | | | Outside of your own skill set, what type of team have |
| business. If this approach were taken more often, start | | | | you assembled to support your efforts? In many |
| up situations would acheive greater success, faster. | | | | cases, small businesses can start out with no |
| Mistake #3 - Poor Working Capital Projections. Start | | | | employees outside of the proprietor(s). But you can still |
| up situations tend to intensively focus on the assets | | | | have a virtual team which can include an accountant, |
| they need to acquire, the space they're going to lease, | | | | bookkeeper, lawyer, marketing coach, technology |
| the leasehold improvement cost, and other initial | | | | service support, and so on. |
| expenditure outlays required to get the business up | | | | Mistake #7 - Poor Presentation. The discussions you |
| and running. | | | | have with a lender and the information you provide to |
| What tends to be either missed entirely or poorly | | | | them either inspires them with confidence or turns |
| estimated is the relistic cash flow required to operate | | | | them off. |
| the business until such time as the business can sustain | | | | It may take weeks to get a loan approval, but it can |
| itself on a month to month basis. | | | | take meer seconds to loose any realistic chance of |
| Part of the reason for this is a working assumption | | | | even being seriously considered. |
| that the business will immediately be cash flow positive | | | | Outside of the obvious need for good grooming, |
| in the first month of operations. In most cases this | | | | neatness, and punctuality, the presentation process |
| doesn't happen, the shortfalls are financed by personal | | | | usually falls apart because the presenter is not |
| credit cards because of the lack of planned working | | | | sufficiently prepared to impress the heck out of the |
| capital, and the borrowers end up in credit card hell, | | | | lender. |
| paying high interest rates with potentially no way out. | | | | But making a good impression is not just about being |
| Unfortunately, creating more realistic, and potentially | | | | enthusiastic and confident in your delivery, its also |
| conservative cash flows may indicate that you don't | | | | about being able to articulate the details of what you're |
| have enough money to actually get started, so the | | | | trying to do and why it would be a good investment |
| temptation is to be overly optimistic in order to make | | | | for the lender. |
| the numbers work, which statistics show is a bad idea | | | | Too often, individuals seeking start up funds do not |
| more often than not. | | | | prepare in advance for their discussions with the |
| Mistake #4 - No Real Marketing Plan. For most retail | | | | lender and just "wing it", potentially destroying any |
| and service start ups, the marketing plan consists of | | | | chance they might have had to get the small business |
| placing some advertising, offering some grand opening | | | | start up money they were looking for. |