Four Steps in Financing Your Business Idea

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All great things start from small beginnings, as they say. A germ of a business idea can grow exponentially and reap massive success, if it is transformed from thought into action. The bridge that needs to be crossed between a dream business and its execution is called financing. Every day around the world, thousands of people come up with a plan, a concept, a solution to a problem that they can sell or monetize. The challenge, however, is how to get it moving from the drawing board to the boardroom. Read on and consider some of these ideas on how to finance that brilliant business idea:

1. Make a Good Business Plan

It all starts with a business plan. A good business plan needs to state the business purpose and vision, the components of a business, and a financial estimate or the calculated capitalization needed to start the enterprise. A business plan also needs to have a projected timeline from conceptualization to planning stage, up to the pre-launch, actual launch, and even a 5-year game plan.

The document must also have a detailed sales and marketing plan so that information on how the product or services will be made known to the target market is clear and set on paper. This document will have a centerpiece page where it will highlight the unique value proposition of a product or service, that is, what needs will the product or service satisfy and why people will pay for it.

It will be much better if the business plan has a SWOT (strengths, weaknesses, opportunities, threats) analysis as well as plans to address each component. For example, a business that will focus on real property development may need professional environmental solutions on land that is targeted for acquisition. These kinds of services will help the business owner or investor to reduce risks by first studying the report about the property, specifically on its geological, hydrogeological, and overall environmental viability as a project site.

2. Pick Committed Partners

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Ideally, before even writing a single word or detail on a business plan, one should already have a partner or a group of partners. In any business, leadership is important in terms of setting the vision and long-term goals of the enterprise. However, it takes a team to execute the plan. Having partners would also help in generating the initial capitalization to organize the corporation and launch its business project.

Another advantage of having partners is that the initial capitalization can be divided among them, lessening the burden for each individual in the corporation. Take note that there are many advantages to having a corporation set-up as compared with a single proprietorship or even a simple partnership. Make sure to research the details of a business organizational set-up including the tax rates and legal as well as financial implications for each format.

3. Find an Angel Investor

Financing a business project can also be done with what is called an “angel investor”. An angel investor is typically a high net worth individual who looks for small companies or start-ups that need financing. The financing is done in exchange for ownership equity or convertible debt. The major difference between an angel investor and a venture capitalist is that the former is more often than not an individual that invests with his or her own money, while the latter is a company that uses money pooled from clients. Both, however, look for a solid return on their investment. For that reason, finding an angel investor takes time and needs a lot of preparation from the proposal to the actual presentation of the business concept and plan.

4. Get a Microbusiness Loan

Going to a micro-business lending company is always an option. It will take patience in preparing the documentary requirements and going through the vetting process. The advantage of this type of loan is that the start-up will retain control of the business, there are no partner-investors to accommodate, and more focus can be done to make the business profitable so that loan payments can be made on time.

There are other steps to take in order to get adequate financing for a business. These fundamentals, however, are enough to get any start-up on the right track. There are many ways to finance a business idea so the focus should be on refining the product or service concept, developing the plan, and making sure that the details of the presentation are on point. Remember: those who fail to prepare must be prepared to fail. Those who plan well and follow-through should expect to reap the fruits of their labor.