By Pedro Enamorado
Getting startup funds for a business can be as simple as saving up, or as difficult as going through dozens of investors to pitch your idea. Entrepreneurs for most small businesses have trouble getting investment for startups. They may also have a poor credit history, or lower-valued assets than what big banks are looking for to take out loans. So, how can an entrepreneur fund their startup business?
- Do market research and market tests. The biggest mistake entrepreneurs make is leaping before they look, and starting a business without a good business plan or checking to see if it’s profitable. Every entrepreneur should be able to answer the following questions before seeking funding:
- Have I found a way to meet consumer needs?
- Are customers willing to pay to meet this need?
- How much are they willing to pay?
- What does my target customer look like? (Their age, demographics, tastes, income level etc.)
- Have I been able to sell my product or service before?
- Have good records of your market research. No one will take your word for it- you have to show banks, private lenders, and friends and family graphs, charts, and survey data to convince them to part with their precious money. You will also want to have some kind of business plan and a resume to offer potential lenders and investors.
- Put up your own money. People respect business persons who have personally invested in their own ideas and have shown a willingness to take risks to make them reality. Any request for loans or investment should mention how much of the entrepreneur’s own money has gone into the business.
- Know exactly how much you need and how you will spend it. Calculating startup costs is an important part of planning a business. Startup loans can help cover inventory stocking and early operational expenses but banks want to know that you have a well-thought out plan to use the funds profitably so you can eventually repay them.
- Get to know your local lenders. Going to local banks or credit unions is usually a much better way to get loans for small businesses than turning to big banks. These lenders have different criteria and are more willing to take personal factors, such as organizational skills and passion, into account when making decisions.
Entrepreneurs should turn to their local Small Business Development Center (SBDC) to get help going over market research and looking for loans. In Louisville, KY the Louisville Free Public Library has amazing research tools and qualified librarians to help with market research.