5 Steps Of The Small Business Startup Financing Process

The process of small business startup financing can be somewhat tricky to navigate. As the future owner of a small business, knowing the process of securing funds for your startup allows you to get up-and-running quickly. Due to the strict lending qualifications of most banks, acquiring a startup loan is often a difficult obstacle for small businesses to overcome. Nevertheless, following these simple practices will take some of the burden off of your shoulders. Keep reading to learn the steps of the small business startup financing process.

Hire An SBA Consultant

The first step to take is to hire a startup consultant to advise you on the options you have for small business startup financing. Many banks and financial institutions do not advertise if they provide financing options for startups. A great way to find a startup-friendly lender is to bring in a broker or consulting company that constantly works with SBA lenders. These consultants save you the time of searching for lenders who provide loans to small businesses. As you undergo the small business startup financing process, hire an SBA consultant to find a suitable lender quickly. You can find the best lenders for SBA microloans and other financing options.

Know Your Financing Options

After you hire a startup consultant, get to know your small business startup financing options. While the SBA will help to put you in contact with lenders, consider opening business credit cards to secure the capital you need. SBA loans typically require you to provide collateral or a capital contribution. Business credit cards, however, operate much like an unsecured line of credit. This means you can take out money when you need it, repay, and withdraw again as you please. Many business credit cards even come with rewards for constant use. Know your financing options while you go through the process of small business startup financing.

Evaluate How Much Capital You Need

Before you commit to a lender, evaluate how much capital you actually need to get your small business started. These expenses include more than location costs and equipment purchases. You will also need to consider coverage costs. After all, you will need business equipment insurance for the equipment you purchase. Technology purchases, inventory expenses, as well as permits and licenses all require capital. After evaluating these initial costs, estimate the price of your ongoing expenses like rent, taxes, and employee payroll as part of your needed capital. When you have a concrete understanding of your funding requirements, you are ready to move along in the process of small business startup financing.

Determine Your Eligibility

There are quite a few requisites for financing options, so determine your eligibility before applying. Every bank and financial institution has their own standards of eligibility for loans or financing options. Most lenders ask that you provide at least two years of financial statements in addition to proof of equity in the business. Some banks allow you to claim relatives’ money as a part of that equity. However, in that case a clear repayment plan must also be provided. As you proceed through the process of small business startup financing, determine your eligibility with lenders you are interested in.

Consider Venture Capital Funding

If you cannot find any financing options you are happy with, consider turning to venture capital funding. There are plenty of venture capital firms looking for startups to fund. Investors can provide you with the necessary funds in exchange for a stake in your startup. This means you will have extra capital without having to worry about interest payments or deadlines. To score an investor, demonstrate that your startup has high growth potential in a highly profitable market. Most investors will want some control over your startup’s operations in addition to equity. However, before accepting an offer from an investor, do some research on them to ensure they will benefit your business. If you want a debt-free small business startup financing option, consider venture capital funding.

The small business startup financing process is necessary to secure funds for your company. The first steps to take are hiring a professional startup consultant and researching your financing options. Then evaluate how much capital you need and determine which loans or lines of credit you are eligible for. If you do not want to worry about repaying a debt, turn to venture capital funding to secure the cash you need for your startup. If you follow these steps of the small business startup financing process, your business will be up-and-running in no time.

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