How to Finance Your Business Idea

When you have a great business idea, it means nothing unless you have the money to finance it. What follow are some useful guidelines about how to finance your business idea in an effective way and make it a success.

  • Write an Accurate Business Plan

Make a comprehensive business plan where you present your idea and how you plan to develop it so that it brings you money. Get inspiration from the wide variety of books on this subject or search the Internet for more sources that can help you create an accurate business plan.

A persuasive business model includes detailed financials that characterize every aspect of your business such as sourcing/manufacturing your product, projected sales, marketing costs, general and administrative expenses.

  • Establish How Much Money you Need

When you determine how much money you need to finance your business, include start-up funds and enough capital to keep the business going until the expenses are covered by revenue. It is recommended to make a list of expenses as specific as possible, because this way you reduce the chances to run out of money. Among other, for the start-up costs, consider salaries, building leases, equipment purchases, office supplies, furniture, and telephone service.

  • Work with a Law Firm

It is advisable to hire an experienced law firm that will establish the legal structure of your business. Since there are many forms of business (S or C corporations, limited liability corporations, partnership and sole proprietorships), the best is to set up the correct business since the very beginning. Work with the law firm also for creating the financial structure.

  • Decide Investors

Decide what type of investors you want for helping you finance your business. You can consider powerful executives or experienced financiers, but also friends and family. Still, keep in mind that if you choose friends or family and the business does not succeed, relationships can be negatively affected.

  • Use your Savings

Using your savings is a way to show lenders or investors you truly believe in your business, but it will also give you control of it.

  • Get a Business Loan

When you want a business loan, first go to the bank or credit unit that you have worked with before, because it is generally more receptive than a new lender. Depending on the amount of money you borrow, you can offer your car or a property. Also check the loan programs offered by the Small Business Administration.

  • Make an Agreement with Vendors

An agreement with vendors can reduce your start-up costs and even eliminate external financing. Discuss with your vendors the possibility to provide you products or services up front, in return for full payment plus interest within a determined period.