Raising capital in this day and age has drastically changed from 10+ years ago. Traditional lenders have stricter requirements for business owners and alternative lenders with less strict requirements have popped up all over the place. There are a variety of different financing options available to business owner seeking to raise capital through these lenders. Therefore it would be wise to know what they expect of you before you approach them for financing. Properly preparing yourself to get approved before approaching a lender will increase your chances of getting approved. Here are 3 ways you can prepare yourself to raise capital in the new economy:
- Build a good personal credit history – A good personal credit history will give you many options when attempting to raise capital. Most traditional banks and lenders will check your personal credit history to determine if you’re a reliable borrower. It’s especially important to have good personal credit history when starting a new business and raising capital from traditional banks. This is because they will focus mainly on your personal credit history to approve or deny you for a startup business loan. They focus mainly on your personal creditability as a startup business owner because your business is most likely not generating revenue and has no credit history of its own.
- Develop a business plan that makes sense – Depending on what type of financing you are applying for, you may have to submit a business plan along with the loan application. This is especially true for SBA loans such as the microloan program. Microloan lenders typically require applicants to submit a business plan along with 3 years of financial projections with their loan application. Even if you don’t need a business plan to apply for a small business loan, it’s still a pretty good idea to write one. I suggest developing a business plan that can be used a guide for operating (and growing) your business.
- Invest your own funds into the business – According to a recent article by Benjamin Ryan over at the Gallup Business Journal, small start ups thrive when the owners are able to invest their personal savings into the business. When owners lack significant personal savings, the number of new business start ups begin to decline. Investing your own funds into your business could help propel your business into the stratosphere pretty quickly. It could also help increase your chances of being able to get approved for a small business loan. Some lenders may require you to invest a percentage of an approved loan amount in your business before they disperse the funds to you.