As a professional business plan writer, I am often asked about how most small businesses raise funds to start their operations. Seemingly, this is such a simple question. However, there are innumerable ways people raise funds for their small business. The two popular sources are friends and family and bank loans. When approaching friends and family or commercial banks for funding, don’t forget to create and use a strategy to increase your chances of success.
Fund Raising with Friends and Family
Probably the most popular way people raise funds for their small business is through friends and family. I mean, for the most part, family is biologically wired to offer you help. As for friends, social protocol often weighs heavily on their conscience, increasing chances of a lending hand.
Just because small business owners or potential small business owners have these advantages does not necessarily mean that exponential growth in their checking accounts is imminent. In other words, do not bank on blood-relations and social protocol for funding your business from this group. Approach the issue with a strategy… sometimes, just any strategy will do.
A popular strategy to employ with friends and family is a “family meeting” approach. In a family meeting approach, potential small business owners will often invite friends and family over for a lunch or dinner. In this meeting, the potential owner will bring up that they are considering to start a business and looking for some input on the topic. This approach often leads to some great ideas for starting and launching your organization. Further, from these discussions, opportunities for fundraising may naturally arise. When this happens, make sure to exploit the opportunity.
Bank Loans as Capital
Surprisingly, most authors of articles, related to business plan writing and starting a company, frown upon an entrepreneur’s chances of obtaining funding from a commercial bank or local savings bank. In my experience, startup entrepreneurs have had a moderate amount of success from banks. The key here is to make sure that you have your ducks in a row when you approach a bank for lending.
For example, almost all banks are going to require specific documents from an entrepreneur. These documents will include tax information, a business plan, resumes, and financial projections. Instead of waiting for the bank loan officer to hand you a standard checklist, compile the documents before you approach the company. This will not only show that you are prepared but it will also actually help you prepare. By doing these steps, you will inherently become very familiar with your prospective company and the accompanying financials. This will lead to being in a better position to answer questions related to your business.
In summary, small business owners or prospective small business owners need to take action in order to increase their chances for gaining funding for their company. A popular action is to create specific strategies to increase the chances of funding. These strategies may include planning a dinner with friends and family or gathering documents needed for a loan before requested. Regardless of the strategy, make sure to approach fundraising, especially in 2019, with a strategy.
Thanks for reading Quality Business Plan's blog. For more information on fund raising for small business and other related topics, check out some of my published books on Amazon: amazon.com/author/paulborosky
Author: Paul Borosky, Doctoral Candidate, MBA., Author