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3 Principles Every Entrepreneur Should Respect when Seeking Financing

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3 Principles Every Entrepreneur Should Respect when Seeking Financing - RISE Programs

3 Principles Every Entrepreneur Should Respect when Seeking Financing

If you share anything in common with the majority of successful entrepreneurs, chances are that you will need to finance your business at one point or another throughout its life-cycle. That means you have to thoroughly understand what it takes to secure funds from formal institutions through borrowing. Whether you’re dealing with banks or negotiating with investors, taking on debt is one of the most intimidating processes in a business. Not only does it challenge entrepreneurs to prove their potential, but it also involves a lot of delicate bureaucracy which can collapse negotiations in the blink of an eye. If you want to make a good impression when financing your business, it’s important to establish a reputation that lenders can trust and support.

Here are three important tips on how to secure funding when taking out loans:

  1. Don’t be Green – One of the biggest mistakes that entrepreneurs make when seeking funding is doing it too soon. If all you have to present to lenders is an idea, your request will fall on deaf ears no matter how genius it might be. You have to prove that your business has value with at least one year of profitable operations. Not only do you need a track record, but you also have to provide financial projections that demonstrate that you can be competitive.
  2. Prepare to be Transparent – If you expect a lender to supply you with any amount of cash, it’s only reasonable that they should be provided with detailed explanations about who they’re transacting with and how. If your business has products or property which needs to be kept a secret, protect it with patents first before seeking outside investment.
  3. Have your House in Order – Part of the due diligence involved in any lending process requires a close assessment of a borrower’s good standing. If you’re going to borrow from a bank, at the very least they’ll try to enquire whether you have collateral to guarantee your borrowing. Other investors will look at your company’s management team, market, products and services, corporate governance documents, and financial statements.

To increase your chances of securing a loan, you should have a business plan, expense sheet, and financial projections for the next five years. These records will give you a strong idea of how much you should ask for, and will assure lenders that they’re making a smart choice by giving you a loan. No matter what your circumstances are though, don’t treat financing in a casual way whatsoever. Requesting to borrow money is an extremely serious exchange of trust and goodwill. Not only are you putting faith in the support of your lender, but your lender is putting faith in your ability to deliver good returns. Anything you can do to streamline this experience will bolster your reputation and increase your odds of success.

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