While going for a venture capital for your business you must always keep in mind that the venture capitalist will evaluate your viability before investing. The advent of startups has helped huge amount of entrepreneurs get capital from big firms and this has helped them in the long term. While approaching an investor you must remember that you need to have a strong idea that speaks your mind. You should be able to explain everything effectively without sounding confused. There are risks associated in every business, but lesser the risk the more chance you have to get an investor.
While writing down your plan you need to give a clear understanding on the ROI, projections, SWOT analysis and much more. It is important to have clarity and make it easier for the investor to understand what you actually want to do. There should be a clear justification of how you are going to spend the capital while working. Today venture capitalists are on the lookout for startups that are focused on growth. These capitalists like to work with growth oriented individuals and learn various techniques that are being developed in the modern world. Job killing reviewsis one of those plans that has been highly successful in to help people learn about home based business.
Finances are a sine-qua-none regardless of whether you’re getting a new business off the ground or infusing much-needed capital to clear longstanding debts. However, overdependence on external sources of funding is fraught with risks and can be quite detrimental for an organization as far as its future growth and survival is concerned. Following are some pitfalls associated with business financing that you’d be better off avoiding.
The risk of low credit score
Borrowing too much money from too many creditors can put you or your business in a debt spiral or trap from which you might never be able to get out eventually making you bankrupt. Least of all your credit rating will fall considerably if you default on your debt repayments. To prevent yourself from being overburdened with debts, borrow money from a few creditors and be committed about repayments.
Personal Debt Risk
Considering the present business environment which is intensely competitive, the possibility of having to close down your business in the event of the same becoming unsustainable is always there. In such a scenario, you could be left with an unpaid debt burden that you may have to clear by selling even your personal assets leaving you insolvent. The solution lies in opting for financing your company in a phased and integrated manner in order to steer clear of amassing excessive debt and also being able to repay the loans within the prescribed time period.
Big ticket investors, especially venture capitalists will want a controlling stake in your business as a necessary precondition for offering you funds. This may lead to the investor or institution interfering in the day-to-day affairs of the company and exerting undue influence on organizational management. Consequently, you may not be able to run the organization in keeping with your mission and visions. The way out is to take over the investor’s stake or share in order to reclaim total control of the company.
‘Money begets money’ is an axiom that still holds true and perhaps nobody understands the significance of this aphorism better than business organizations. Businesses, big or small need money at every twist and turn ranging from channeling funds into departments that aren’t faring well to financing new projects. The manner in which you invest funds in your business impacts its growth and development both in the short-run and the long run. The pattern of your capital investments affects your capacity to hire skillful employees, procure raw materials, and adopt effective marketing strategies and so on.
Having an innovative business idea is akin to having a pipedream if you cannot find the requisite wherewithal to turn the same into reality. Regardless of whether you want to provide a unique service or launch a groundbreaking product, you’ll need strong doses of capital to prepare the groundwork in order to get started. You’ll need to go in for debt or equity financing for sourcing capital to get your venture off the ground.
Capricious Economic or Business Cycles
Irrespective of whether you’re in charge of a conglomerate or running a small business and/or regardless of whether of how perfectly you’re managing, there is no getting away from the vicissitudes of economic cycles. Every business has to go through the ups and downs. The survival of your venture will to a great extent depend upon your level of preparedness with respect to business downturns and economic slumps.
The financial health of a business organization, big or small, can be gauged from its capacity to sustain employees. Amongst other things, a financially sound company must be in a position to pay salary to its employees. And in order to make sure that the organization will be able to pay remuneration for the next couple of months, it’ll have to go in for periodically auditing its accounts-financial planning to be precise.
Finance is the lifeblood of any business without which the same will not even get off the ground, let alone thrive in the long run. However, sourcing funds had always been a hurdle and it has only got tougher with the passage of time. Regardless of whether you need to fund a new business or pump money into an existing business, sourcing the wherewithal can be an uphill task. The following guidelines or tips, it is expected, will go a long way in helping you to see through the challenge.
Think about tapping into your 401 (k)-This is an option you can explore especially if you’ve lost your job and thinking of going on your own. You may not have kept track of the amount of funds that have accumulated in your 401(k) in the years when you were employed. You’ll be able to use these without getting penalized but you’ll be better off consulting an experienced tax professional.
Some Banks Support in the Setup of Smalltime Business-With every passing day, most banks have lending conditions and policies stricter which means you’ll have to run from pillar to post in order to qualify for a loan. Thankfully few banks like Bank of America, Citicorp, and J.P Morgan Chase provide funds to those who’re sincere about starting a small venture.
Crowdfunding-This is another efficient way of raising funds but the amount that you’ll be ultimately able to garner will be peanuts, relatively speaking. That is if you’re thinking of operating a meal supplying service from home, a sum of $2,500-$3,000 might suffice. On the other hand, if you’re planning to open an eatery in your neighborhood, sourcing capital via crowdfunding sites may not be a good idea.
Look for microloan-Chances are that you’ll get turned down by a bank when you apply for a loan nine times out of ten because you may not have any worthwhile collateral security to offer. However, you can go for a microloan where the criterions for qualifying are less stringent and you also have to submit few documents.