Things to Avoid When Trying to Secure Business Funding

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Things to Avoid When Trying to Secure Business Funding

Securing business funding from investors or a financial institution – or both – is often a key step for many businesses whether starting up or financing expansion.

Seeking funding needs careful preparation; many have foundered through not planning properly when trying to secure financial backing.

On the other hand, many businesses have started as fledglings and, thanks to securing the right funding, have gone on to grow to a point where they find themselves generating plenty of tax paperwork in paying several staff and contractors.

So, what should you look to avoid when looking to secure funding?

Vague planning

You absolutely must have a clear vision as to what your business offers, how you’ll let your market know you offer it and how you’ll provide it.

Investors or commercial funders want to know – clearly and succinctly – the problem you solve and how you plan to achieve this, so a comprehensive business plan is vital. Don’t approach funders without one.

Extravagant predictions and valuations

Some business owners fall into the trap of over estimating the worth of their company and making extravagant revenue and sales forecasts.

Whatever claims are made need backing up with convincing supporting evidence; funders – especially investors looking to get behind a business – aren’t necessarily expecting spectacular success over a small time frame.

Those with a balanced outlook fully understand it takes time for a business to gain traction, grow and scale up.

Showing arrogance as opposed to passion

It’s important to demonstrate why you’re the person to lead and drive the business forward, but over the top claims and groundless boasting won’t help convince a funder. Passion for what you’re doing and a hunger to succeed just might.

Investors are putting their money in people, so if you make a convincing case with plenty of passion and hunger to back it up, then funding could be yours. Arrogance and bragging are much less likely to make it so.

Not knowing your boundaries

Be clear about what you’d be prepared to ‘give away’ in equity, and the other commitments you’d make in meeting the conditions proposed by funders.

For example, regarding equity splits in your businesses, determine how far you’d go in a negotiation and stick to it. In the heat of the moment it could be too easy to give away more than you’d like to.

If you feel tempted to break boundaries, always ask for some time to think it over before committing.

Know what the funding is for

It helps to let people know exactly where their money will go if they put it into your business.

Of course any funding body or investor accepts that things can’t be totally cast in stone, but they would expect you to have a good idea at least of how their money will be used.

Overpromising and ‘blustering’

Investors especially will likely ask several questions – some of which will challenge you to check how much you really are behind your business model. Don’t get flustered into over promising; stick to what you confidently feel your business can achieve.

Be aware some investors deliberately ask questions they know you can’t answer because there are too many variables as yet unknown; they’re checking your integrity, so don’t make something up.

Vague or non-existent marketing plan

A key part of your business plan, but worth a mention on its own as funders will want to see how you’ll take your product or service to market.

A coherent marketing plan is very important.

Also, they’ll want convincing that you know who your market is, whether it can sustain your business in terms of demand and – thirdly and crucially – whether this can be achieved at a profit even if more in the long term.

Take your time

Before approaching investors or funding bodies, take the time necessary and try putting yourself in their position. What would you look for in a potential business and what would make you inclined to provide funding?

Nisha Pandey

Nisha Pandey

Owner & Founder at SeoTechyWorld
She is the founder of SeoTechyWorld.com. She is fun loving person and love to share about SEO, blogging, social media and latest technology tips.
Nisha Pandey

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