Getting startup funding is never simple. It requires familiarizing yourself with many different options and narrowing them down to the best option(s) that make sense for your business. Moreover, it requires capital planning. I know what you’re thinking: another “advisor” writing about creating a BUSINESS PLAN. Rest assured: the following article outlines 6 tangible steps to get startup capital.
6 Steps to Get Startup Funding for Your New Business
Step 1: Get Your Paperwork in Order
It is going to be difficult to get startup funding and capital if your business is not legally formed. If you have questions about the proper legal formation, check this posts where you can see the different types of legal formations. Also, apply for an Employer Identification Number for tax and other business-related purposes.
Step 2: Go See Your Banker
Don’t have a banker? To set in motion the process of getting startup funding, I highly recommend working with a community bank, which is likely to be much more small business-friendly than a national bank. A bank will likely not give you a loan today but may lend to your business in the future. Develop a rapport with a banker, look into their business credit cards, and open a business checking account.
Step 3: Analyze the Numbers
Your financial records will be requested when you apply for a loan to access startup funding. So whether you are barely starting a business or generating modest revenue, measure the performance of your business and set performance goals. Be sure to identify your business cash needs over the course of the next 12 months. Last but not least, make sure you establish reporting systems to track performance (e.g., QuickBooks, Xero). We highly recommend you this post on how to make a make a budget for your small business.
Step 4: Type Cast Your Business
Depending on the growth profile of your business, your capital options may be significantly different. At the expense of overgeneralizing, I’ve narrowed 4 types of businesses, and your business should likely fall into one bucket (only one):
- Young Small Business, like a one unit restaurant, retailer or beauty salon
- Fast Growing Startup, like Uber 5 years ago
- Product Launch, like the product-oriented businesses, featured on “Shark Tank” (e.g., PipCorn)
- Solopreneur, loan-wolf seeking the dream either in accounting, bookkeeping, legal advisory or something else amazing
At the time of applying for a loan, your startup funding options will differ depending on the category your business falls into. Just keep reading to learn your options.
Step 5: Assess Your Funding Options
Once you have determined the type of business you are in, take a look at Figure A below to identify the capital options best suited for your business. This list is comprehensive, but by narrowing your options based on the type of business you are operating, I just saved you 100 hours of work. Thank me later. Then use Figure B to choose the type of funding that best works for you based on the stage of your business. It’s that simple!
Figure A: Funding Options by Business Profile
Figure B: Start-up Funding Options
Step 6: Plan for the Future
Make sure you prep to get a bank loan – it’s cheaper. A LOT CHEAPER. The future success of your business may rely on its ability to access cheap sources of capital. Be prepared; if you are not, be aware smart competitors will be. You can start by reading our Ultimate Guide to Get a Business Loan. At Camino Financial we will be glad to assist you: contact us and let’s talk about your options!