The 5 Common Challenges To Get Funding For A Business:
Do you know what one of the most frequent problems entrepreneurs face is? It’s nothing to do with coming up with innovative ideas, hiring top talent, or even edging out the competition! All of these are small issues compared to the big one: getting funding.
Money is essential for growth, but it’s tough to secure. Without the financing, you’ll struggle to get your business off the ground or keep it afloat once it is, and going up against big-name brands will be the equivalent of climbing Mount Everest!
Put simply, securing funding is one of the most beneficial things you can do for your business.
But Gaining Funding Isn’t As Easy As It Sounds…
Navigating the process of getting financed has become more demanding over the last few years. With a decline in community banks and more global competition than ever before, finding someone who will be more than happy to offer you some extra cash is difficult – and that’s putting it lightly!
So, you need to give yourself as much of an advantage as possible when you start sourcing funding – and that begins with knowledge. By understanding the common challenges, you can put plans in place to overcome them before you face them, ensuring you get the money you need. Let’s take a look at some of them.
Service-Based Businesses Don’t Have Collateral
One of the most frequent challenges faced by modern businesses is a lack of collateral. If you’re a service provider without any physical assets, what can you offer the bank? Unfortunately, there isn’t an easy way around this problem, and most big banks simply won’t give you financing without collateral.
So, the answer is to look elsewhere. There are alternative providers out there who won’t demand a physical asset as collateral. Some may ask for a share of your profits (think Dragon’s Den!), for example. For these loans, make sure you know the value of your business and how to pitch well.
Every Business Needs a Business Plan
You might be used to running your business with more of a caution-to-the-wind approach, and it might have been working for you. You take every day as it comes, and you’re adaptable, which are both good things! Unfortunately, though, lenders won’t accept that.
They want to see a solid business plan before they jump on board your ship so that they know it won’t sink. You need a plan that outlines the following:
- Business model
- Market size
- Product development and innovation
- Marketing strategies
- Management bandwidth
- Strategy road map
Be as detailed and thorough as possible to win over lenders. Remember that this is how you’re going to convince them, so don’t rush it!
Have You Got Your Finances in Check?
Having a good grasp of your current finances and future predictions is a sure-fire way to impress lenders. In fact, it’s what they expect! If they’re lending you money, they want to know it’s going to someone who knows how to handle it.
Before your meeting, spend time going over your numbers. Be ready to recite your average yearly profits, expenses, and smaller figures like how much your products or services cost. When it’s crunch time, getting tripped up by your numbers is the last thing you want.
You should also know how much you need. Many entrepreneurs struggle to demonstrate the facts and figures of why they need financing and how they’ll use the money. Know this before you start your search and you’ll be putting yourself in a much better situation.
Be Ready to Show Off the Value of Your Business
You might know the profits you’re making, but what is the actual value of your business? This comes down to six different elements:
- Talent and culture
- Product extension
- Channel extension
- Brand architecture
These go beyond profit and explore what makes your company unique and why lenders should finance you. By exploring each of these you should be able to eloquently explain the current and future potential of your brand, really selling it to your financiers.
Know When to Ask For Help
As an entrepreneur, you might be dead-set on the idea that you can make it alone. But even the greatest people always have someone else holding them up! Many startups struggle to get funding simply because the CEO takes too much on their own shoulders and doesn’t share the load.
A person is not an island! Business can’t be done without connecting and trusting others, and letting someone else in to help with your funding journey will be one of the best things you do. If you can find someone with experience in areas you struggle with, you’re instantly boosting your chances of successful funding.
Putting together a funding plan is also incredibly time-consuming, and a pair of extra hands will help you work on it without taking your eye off the ball when it comes to actually running your business.
Learn More About Growth, Valuing Your Business, and Funding
The world of funding isn’t an easy one to navigate – as I’ve hopefully made clear here! It’s full of hurdles, and potentially many mistakes you can make along the way. But, with the right knowledge and a lot of preparation, you can make securing your funds a lot easier.
For more advice, get in touch with our growth experts at SGFE today.