Cash is one of the first things you will need for your business, whether it is your first start-up or if you are expanding. There are many ways of going about gathering this cash, including using your own savings and borrowing from the bank. The following is an outline on the pros and cons of each path.
Dipping into your savings
It is difficult for many small businesses to find a bank that will provide them with a loan; this is especially true if you do not have any previous sales information or data to back them up. Depending on the amount of cash needed, it might be a quicker way to revenue to use your own cash.
The best and safest way to invest your money wisely is to take it slow and steady; instead of purchasing your premises, spending money on advertising and employees all at once, make sure that your idea is viable first. One inexpensive way of checking the viability of your idea is to do market research; this may seem expensive, but in actuality, all you have to do is ask friends, family or even strangers on social media as to whether or not your idea will fly.
Once you know your idea will work, and people will purchase it, you can start working on a prototype of your product. For example, if you are trying to sell a new holistic type of dog food, make sure that all the right ingredients are in the food – and that the dog will actually eat and enjoy it. You should also recruit professionals to help you – in this case, a veterinarian would be an excellent idea, as they can provide you with the hard data on what a dog needs to be healthy. You can move onto packaging, advertising, and the like.
This “small steps” approach will ensure that you are spending money within reason, in ways that make sense – and will give you a better return of capital later on.
Asking the bank
If you have a really good business idea, and you have completed the research and have the information to back it up, garnering a bank loan might be the best logical step. Just keep in mind that many banks are very particular on who they lend to – they do want their money back, after all. Here are some tips on making sure you have the best chance of receiving that loan.
1) Know your business. A loan officer will ask you many questions about your potential business – when asked about revenue projections, being able to answer right away will leave a better impression than having to go through scads of paper.
2) Have the data to back it up. If you know that in 2012, 62 percent of households had at least one pet (Human Society), have the link or the document to prove it.
3) Financials. This is probably one of the more important documents you must bring to the table when meeting with the loan officer – if you are able to, outline the revenue projections for your business, and how you will go about implementing your business plan.