How to Find Money to Grow Your Business in Every Stage

Even the most disciplined and effective control of costs of collection of money your business can run short of cash. As a matter of fact, this is a fairly constant when growing your business.

There are two key periods of consumption of capital to be considered: the launch phase and growth phase. Sources of capital available differ somewhat in each of these periods. But raising money is never easy.

The launch phase

This period includes the time from the day they realized their business concept through the first six to twelve months after it officially opened for business. You can see your business at this stage as a “money sponge” – everything you do seems to require cash.

You may feel very conflict during this period with respect to your money. You have read or said that you need to keep their cash in the first days of business, yet it seems that there are many expenses that must be done. The key question to answer is: Can your marketing strategy, keeping a tight rein on your cash available? If not, you will find yourself visiting the bank for a cash advance most of the time you want.

Sources of initial capital

Savings
He is probably the most used source of initial capital, as it should. Be realistic – why should anyone take a financial risk that until you have proven that you can gain with your own money?

The ideal scenario would be for the new owner to have planned ahead enough so that it accumulates all the capital you need before your job is closed and opened for business. The reality is that the personality type that carried out the launch of a new business is also characterized by impatience. This often leads to dodge the amount of money to start.

His family was active can help make money go further with the launch of the necessary tasks, such as billing to write, filling envelopes, answering the phone, doing the accounts, through brochures, etc.

Credit Cards
If you enjoy good personal credit, you will receive at least several offers of “cut rate” credit cards. A common technique is to offer a special introductory interest rate of between 6.5% and 8.0%. If you read the financial pages in the newspaper, you know that this rate is lower than the current prime rate.

So what’s the catch? The rate is usually good for only six months, at which normally rises to 6.5% in prime (15%). Obviously if you are carrying a significant balance of more than six months, you may want to reconsider the use of these special cases.

However, it is very convenient for walking into a bank and leaving with $ 5000 $ 6000 in cash, without having to deal with a bank official. We recommend that you apply for at least one of these fare cards and put away safely until you locate your business in one year or until an emergency is clearly defined along the sales opportunity.

Family Loans
This source of capital is probably the second or third most widely used source of initial capital. If you plan your business idea, even a bit of focus can usually be at least one family member $ 1000 – $ 3000 loan. We call this “love of money” because they are based on more than his love for you, that a thorough review of your business plan. Amounts above this level are more difficult to obtain without more formal, such as a promissory note. If you fall behind in payment, do not be surprised if the Thanksgiving dinner was approached by the lender for a “heart to heart” talk.

A key guideline to follow: do not borrow from a family member who can not afford to lose money. Unfortunately, it is likely that only have a 60% chance of paying the money back by default is not uncommon.

Home Loans
During the 1980s, the lending of money in the equity of their house was a popular way to finance a business launch. The most important fact to remember in this type of loan is: If you default, not just walk up and chalk experience. The bank will be on your way fast! In general, do not really want to sell your home, so you press to accept a repayment schedule, which often require you to find a job quickly.

Note: Implementation of a house before leaving the equity or lose your job, unless her husband takes a substantial part of income.

Loan insurance
Although less frequent today than in los’70 ’s y’80′ s, many people now own a type of insurance known as a lifetime. This policy is a combination of life insurance and savings as part of your premium goes into a pool that is invested by the insurance company. After the first 3-4 years, the dollar value of the portion of savings, known in insurance jargon as “cash value” begins to rise significantly. For example, in a period of seven years old, $ 100,000 face value whole life policy, the cash value is $ 8000 or more. You are entitled to borrow any available cash value (total value minus the previous loans) in the very attractive interest rates – an average of 8%. You are charged interest only once a year. If you die before paying, the loan amount is deducted from the death proceeds.

Barter Exchange
Bartering is “trading for the exchange of money.” The key to the exchange is an acceptable method of valuation of each of the games offered. This is where trade comes into play barter These are companies whose business is to introduce traders to each other, ensuring a dollar securities and registration of the transaction to the IRS.

Traders active use of barter exchange from the computer to keep track of how many barter “points” that have accumulated and the number of points needed to buy certain products and services. A typical barter exchange could start with a carpet installer offering $ 1000 for carpet installed in exchange for $ 1 000 in oil changes that are sold at a transport company, for $ 1 000 in trucks which are then sold by the carpet Install a printer that offers a $ 1 000 in print.

As a new owner, you can create your own barter exchanges simply go to the suppliers of goods and services you need and do not want to pay in cash.

Informal groups of investment
Some business concepts with great success from its initial gathering of a group of private investors from the founder of friends and acquaintances, we are personally familiar with a start-up that was funded by the award of a $ 1 investment of 000 each of the 25 investors, all members of the softball league, which bought shares for shares of the new corporation with the clear understanding that you could lose all the money, but great fun to enjoy some meetings of shareholders.

If you wish to explore this option, we suggest that you first contact an attorney for small business with experience in capital investments for new businesses.

The growth phase

The growth can be fun, but can also introduce additional concerns such as money you realize that you can not buy inventory or materials fast enough to maintain if you only use the money generated by new customers. This is particularly true when the usual time of payment in their business is over 60 days.

At this point it is not uncommon to feel frustrated – you can see sales ready for the taking, if only you can find more money to pay its sales representatives or to restock the hot seller in her store.

The time has come to more traditional sources of funding to help expand your business.

Introduction to bank loans
Once you have made your investment in your business at a profit, financial institutions may be interested in talking to you about your loan money.

Be careful. The bankers are very knowledgeable people. Even when you can show a strong credit rating and security demands that have yet to explain in enough detail how to use their money, what benefits are expected to do with how you earn it and pay again. The bankers are reluctant to advance money to just improve your lifestyle.

Bankers to consider its application for a loan they would like to see produce profit of $ 3 for every $ 1 of your money using a formula often tacit. To produce this result is financial investing a substantial part of its loan and focused on marketing activities, such as magazine ads, direct mail promotions and adding sales within and outside assistance.

Keep one fact in mind when considering a bank loan: more than anything else, banks must ensure that they are paid back on time. Be prepared to offer various forms they can use to get your money back if the worst happens to your business. Do not take this as a personal insult. It’s just the way the world works in commercial banking.

The eight steps for requesting a Bank loan
Be realistic though, if you are considering the request for bank financing – it can take several months to complete its business plan summary and gather the necessary documentation to meet the demands of the bank. Allow sufficient time before applying. Avoid waiting until you are desperate for money!

Step 1 – Why do you want money?

Most common reasons:

* Payment of debts

* Substitute new debt for equity

* To purchase equipment, vehicles and buildings

* To expand the business through more than marketing, inventory, people, etc.

* Be honest. Have found that actually the money from sources other than banks?

Examples: credit terms from suppliers, payment of advances from customers, loans from family, friends, private investors

Step 2: Output Banks

* Check how financially sound banks that are being considered.

* Ask for the bank to the latest annual report. Read the description of how your business last year and look at their financial statements

* Ask the banker to compare their capital reserves to meet the needs of federal regulators.

* Ask for a sample package of loan application before deciding which bank to choose

* Read over the packet, it notes on everything that was asked or did not understand

* Contact your bank loan officer with your questions. If you’re not comfortable with how they are answered, look elsewhere.

Step # 3: Communication with the bank

May not require that the real business plan, but at least:

* The history of your company

Summary of market conditions, including competition and marketing strategy of the 5 P’s – People, Product, price, place and promotion.

* The historical financial results and future projections – profit and loss and cash flow

* Error on the side of conservatism

* Better passing financial accounting paper

* Your resume – Why are you qualified to run the business?

* Examples of the products or services (photos, brochures, videos, etc)

* Personal financial statements

* If necessary: inventory requirements, aging of accounts receivable

Step # 4: What to Expect the first visit the Bank

* Try to perform the first office outside the bank loan, for example, for lunch – it is “neutral territory”.

* Come prepared with a combination of one-page summary of the business plan and loan application

On the loan application – indicate the amount of money you are looking for, what we used to win (be specific), the time you want to borrow, how you will pay back the loan, and what you do if your income is not sufficient to cover the loan payments.

* Expect to examine your credit history, so do so before making contact with one of the three major credit bureaus: TRW, Equifax and Trans Union.

* Think in advance what you will use as collateral for the loan – which is a guarantee.

* Expect the loan officer to ask some pointed questions about his certainty of achieving future sales and profits that are projected.

* Know your personal finances and the company forward and backward!

Step 5: realize the importance of cash flow and credit

Realize the essential reality of the loans a bank want their money back! And they want it on a regular schedule. They do not really want to have to take charge of your company or sell its collateral.

This reality is reflected in the bank doggedly pursues its projected cash flow for the year or two after you receive the loan.

The “C” cash flow is one of the five “C” that bankers look for good borrowers. The list of the “5 C” is:

* Capacity – Ability to pay.

* Character – His desire to show discipline and keep their promises to pay

* Capital – How much have you and other investors put into the business?

* Conditions – How is your industry doing?

* The security – your security.

Step 6: Understand the types of loans

The most commonly used are the types of loans:

Short-term loans. For a year or less. Normally used for short term use, such as inventory. Need for loan repayment and are produced in the same period of 12 months.

Loans for working capital. Even in the short ten-n, usually to cover their cash requirements after making and selling their product, but before you pay.

Seasonal loans. Loan is paid at the end of the season.

Term loans. Maturities of one to five years. Used primarily to purchase capital equipment and provide semi-permanent increase in working capital. Drawback payments.

Long-term loans. More than five years’ duration. It is used to build, buy property, buy an existing business or buying a franchise.

SBA loans. Loans where the payment is partially guaranteed by the U.S. government. Line of credit. Similar to a credit card loan.

Step # 7 .- Learn Loan decisions are made

Banks use the following process to evaluate your application:

* Evaluate the 5 C’s

* Wanted a persuasive marketing strategy

* They are to determine its part

* Are the financial projections to support your marketing strategy

* They see how much you can do in your project loan

* Wanted a significant experience in managing your type of business

* They look at how much of your own (or family) the money you have in the company

* They look at what’s going to do with the money.

* They examine the most recent financial results for your business.

* They examine what security (collateral) that may mean.

How to negotiate with the bank:

Interest rate – Get the two banks to offer and compare their rates.

Term Loan – Establish a maximum monthly payment you want to perform a unit of length and maturity that allows it.

Personal Guarantee – It’s hard to avoid, especially if you are a corporation. But you never know if you do not ask.

Guarantee – Try to get only by companies with guarantees. If you insist on the personal guarantee, not to his house. Try putting a CD instead.

Shop around – do not settle for the first bank to offer. If the proposed package is good enough to be considered for any bank loan is good enough to show several banks.

Step 8: Understand What happens after the loan application is accepted

You should review the process with your accountant to make sure it’s in your best interest. You can use your meter as a negotiator with the banks providing financing. At the close of the loan, you must:

* Produce the title of your warranty.

* In general, sign personal and commercial guarantees.

* If a company, sign a corporate resolution to borrow “, that says you are the officer of the licensed companies can sign agreements.

* Sign if signature cards open business bank accounts.

* Sign a promissory note (this is where you sign your life away).

* Sign a disbursement request to release the funds to you. In term loans, you receive the loan in its entirety at once. Lines of credit, you only get what you need initially. The rest are adopted, but that saves you the interest cost.