Three Funding Requirements for Raising Money
Why doesn’t a bank take a serious look at loaning my business money?
I’ve been offered a $50,000 line of credit, but they want to deduct a daily payment out of my bank account. Doesn’t that defeat the purpose of having the money to grow my business? How do I really attract an angel investor? Is crowdfunding an option for me? If I could only get on Shark Tank or West Texas Investors’ Club!
Three Funding Requirements for Raising Money:
Funding Requirement #1:
You must have the time, resources and expertise to focus full time on preparing a funding proposal and presentation for raising capital. You must have a list of qualified contacts to pitch and always ask for referrals. If your business can’t operate without you, you’re either not ready for Requirement #2 or you need to locate a credible, successful partner who may also be an investor. But these don’t just fall out of the sky. Do what it takes to make your business better and be attractive for funding, so you can focus on the remaining Funding Requirements.
Funding Requirement #2:
You must have all relevant financial, operational and sales information to demonstrate you know your business and how to leverage new capital for accelerating sales and improving profit margins. You have to know how to repay the loan or provide an exit strategy for an equity investor. After each presentation, make adjustments and changes based upon feedback received. If you don’t have the necessary expertise to know and understand this information, you have to fill those gaps. Go back to Funding Requirement #1. There are alternatives to getting the right expertise. Interim expert and credible talent can be a fraction of the cost versus traditional hiring or consultants. Be willing to explore a blend of fees and equity, based upon results and performance.
Funding Requirement #3:
Sell the facts without the hype and blue sky; and keep repeating first two requirements. Always be improving your proposal, presentation and pitch until you succeed. Be willing to negotiate because an investor will be considering both their money and time. Investors want to build successful businesses. Consider it a benefit if they are willing to give of their time and know it will cost you more to get that expertise. Update your progress to all investors/lenders you have presented to before, even if they gave you a ‘No’!
Attitude for Success
- Explore options. Assuming you meet these three funding requirements, take every opportunity to meet a potential lender or investor. Explore all the different funding options available; understand the differences, their requirements and needs, costs of funds and timing to receive funds. Be informed and ask a lot of questions. Some loans can be very expensive and put your business in an endless loop of always having to borrow more money.
- Be respectful of investor and lenders time, give the facts and then listen, listen, listen and learn. A ‘No’ can often just mean, ‘Not Now!’ Especially, if you have the nailed the funding requirements. Your opportunity may just not fit their funding criteria, but they may know someone who might be interested.
- Any demands or veiled ego driven comments like, “Well you are missing out on an opportunity of a lifetime!” will get you tossed out on your ear without any chance of recovery. I’ve never had anyone who has made such a comment achieve incredible success and come back to me to ‘prove me wrong.’ If they did, they most likely would still be looking for more money and I would want to know how they had matured and become more wise in the midst of their success. Just be respectful and honor the investor’s or lender’s time and consideration. Remember to ask a lot of questions. Raising growth capital is a mega marathon, especially if you truly have a growth oriented business.
- Investors and lenders have the money and much more practice at hearing pitches than you are at giving yours. Leave your ego at home. The moment you pull the ego card, they will find a polite way to shut you down. If they play an ego card, it will always be bigger than yours. It is extremely rare for them to hear something they have never heard before, even if you think you have the most incredible opportunity since Microsoft, Google, etc… If they don’t understand, they will ask you a lot more questions because they know the importance of learning and understanding.
- Sell the facts and be credible. Authentic character, passion and enthusiasm always shine through. Investors and lenders definitely have an unassuming way to gauge your character and that usually happens when you least expect it. Watch Gil on West Texas Investor’s Club. Just be who you are, take any advice and be willing to make necessary adjustments. We all have room for improvement.
There is no shortcut or secret angel in the clouds. Sustainable business success is never a straight line from A to Z and a business plan must be a living, dynamic, ever-changing process. Do your research and Google all the different types of funding available to small businesses. Be prepared and seek to understand the real cost of capital. Do your research on the investors and lenders. You better know and appreciate their background and experience. No one else can raise money for your business except you or you and an invested partner. Anyone who says they can raise money for you is just wanting to make the fees.
Below is a funding requirements roadmap:
Follow these funding requirements, develop the right success attitude, be flexible when it’s in the best interests of your business and you will find the right funding designed for supporting you and your business. If you know you have gaps in meeting these funding requirements, always be willing to seek expert advice from peers who have done it before and been successful. You have to close the gaps to accelerate the opportunities.
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