Planning ahead is critical if you want to make the proper decisions on the journey to raising capital for your business. It’s also important to plan if you desire to have the best chances at getting the results you want. Raising capital can be quite challenging however if you prepare yourself to get approved you will find it to be quite simple. There are several important factors you will need to focus on before attempting to raise capital. These will help you develop a proper plan that will give you the ability to qualify for, obtain, and manage capital for your small business. It will also help you grow your business and profit from the capital you raise. They include:
- Must have a plan on how the debt will be used – Developing a business plan that outlines how you want to spend the capital you raise is critical to using it effectively. Any capital you raise should be used on revenue generating activities (RGA) that produce a sustainable income for you and the business. Revenue generating activities can include hiring a sales and marketing team to generate leads and close sales for your business.
- Must be able to supply the proper documentation – Whether you work with a small business loan broker or go directly to a bank, you will need to have the proper documentation to apply for a small business loan. As a small business loan broker, I can tell you that you will most likely need a business plan, w2’s, tax returns for the last 2 years (business and personal), business bank statements, and incorporation papers. Depending on what type of small business financing you are applying for, a bank may make you supply some or all of the aforementioned documentation to determine to approve you for small business loan. A small business loan broker will ask to see the documentation to determine what bank or lender to approach and what type of financing you will most likely qualify for.
- Must have funds to pay brokers fees – If you plan on working with a small business loan broker (which I recommend you do if you want to increase your chances of getting approved for a small business loan), you should also plan to pay broker fees. This can be included in your list of business expenses and the total loan amount you are requesting. That way, you will be prepared to pay the small business loan broker you hire to help you. Small business loan brokers typically allow their clients to pay on the backend (after funds are received). It’s designed that way primarily because it produces a win-win situation for both parties. (The small business loan broker doesn’t earn anything unless they actually help you get funded).
- Must have a plan to service the debt – Outlining a plan of how the capital you raise will be used will give you a good idea of how you will be able to service the debt. It will also put you in a better position to service the debt. Proving to a bank that you can service the debt is one of the primary keys to getting approved for a small business loan.