Today's Top TipOnline business plan scams are alive and doing very well. There's even a new wrinkle: the "crowd funding". Trust me, no one makes money but the promoters in this scheme.
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There are a lot of lenders investors for small business, all sources for business financing: banks, Small Business Administration, private angel investors, leasing companies, strategic alliances, venture capital investors, SBICs, MESBICs, credit union coalitions, and many more. But when a company is seeking financing, there never seem to be enough funding sources.
Meeting the Expectations of Lenders and Investors for Small Business
Investors for small business respond to business plans that meet their specifications; they ignore the others. I repeat: They ignore all the other business plans. T-r-a-s-h-e-d. Tossed. Caput. Not so much as a thank you letter.
Avoid the bottomless pit by putting your plan into the right hands.
Your business plan must have investors identified - before it is ever written. It doesn't matter how great a company is -- if it doesn't fit the parameters of standard funding sources, business loans and business grants will be out of reach.
Consider, for example, the entrepreneur who has identified an excellent retail business in a thriving area. For an investment of $100,000 this entrepreneur can generate a 20% annual return. That sounds like a pretty good return on investment. Sadly, unless this entrepreneur has real estate collateral or a rich relative, the odds of her obtaining the $100,000 loan are really remote. The 20% return would only be $20,000 annually -- an insufficient return to support her and repay the loan at even a modest interest rate, and much too low of a return to interest venture capital or angel investors.
She doesn't "fit".
Before devoting the tremendous time and energy required for a business plan, first determine IF your company "fits" the parameters for particular lenders or investors for small business, and, if so, which ones.
Here are two free charts to assist you in making this determination:
First, find out how lenders and investors will perceive your company. Not every type of lender or investor welcomes all stages of development. Determine where in the matrix your company is likely to fit. Review the funding pages in the this website to get a handle on what kind of companies different lenders and investors look for.
Second, review the Small Business Loan Sources Chart. Review the qualifications for different types of lenders and investors and find the best fit for your company.
There are a lot more types of business loans than what are outlined in this chart. Investigate the ones that seem best for your business. Look especially for the "exit strategy", i.e., how the lender/investor gets his money. Some are paid back directly, and some won't make money until your company has an Initial Public Offering.
The key is to find the one that best suits your company and your circumstances.
If there is no potential lender or investor, STOP. There is no sense in going any further until the lender or investor for the business loan can be identified.
This is one of the most popular means of financing a business, especially a new business. The SBA has multiple programs available -- everything from microloans to mentor-protege programs for entering the big time.
Angel groups are just that: business angels. The money and expertise they bring to emerging businesses is absolutely life-saving. I can't imagine a thriving business economy without our angel investors.
From small boutique venture capital firms, to huge international conglomerates, there is hardly an industry in existence that the venture capital world has not influenced.
Bootstrapping is way back in vogue, although in truth it never went out of vogue. The proverbial garage may be a bit overrated, but the techniques of successful bootstrappers are very real.
A full fledge public offering is outside of our area of expertise, but the small business IPO may be right on target for many small companies.
Unique businesses qualify for business grants from a myriad of sources, both government and private.
When none of the traditional sources seems right, step into the world of alternative financing, where anything goes.
Jog your memory with all the different types and styles of
investment. There should be one or two or three that strike your
Be sure to check
Articles on Business Finance -- there are some more gems
Few companies are financed entirely by one means. Typically, it's a conglomeration of funding sources. Perhaps a company starts out bootstrapping, but soon applies for an SBA loan, or looks for angel investors.
Look to every avenue that may provide capital when you look to how to finance a business. Sadly, it's not always obvious. Sometimes even suppliers may be able to help out by granting extended terms. Or a landlord can lower rent in the first few months in exchange for a bit higher rent later.
Good luck in your search.
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