Small Business Financing, the Economy and Investors
The economy is like the tide, predictable in that sometimes it is high and doing great, and sometime, not so much. We came out of a bad time recently, and when it was over, small businesses saw that lenders and investors have opened up the funding spigot after the “credit crunch” in the aftermath of the Great Recession.
All they needed was a good idea, and someone was going to be willing to jump on board and help them get started. Cash doesn’t last forever however, and as the tide is receding, the cash is not flowing quite so easily.
Things are far from bad, but the water isn’t quite as deep, and investors and lenders are being more careful about where they put the funds they have.
Nowadays, it takes more than a good idea to get the money. You also need a written business plan full of well researched information. That means you know what you are going to do, you know who your market is, you know how you are going to reach them, and you know where your money is going to go.
Investors also are much more intentional when it comes to the selection process now. They ask pointed questions, like an interview, and in many cases require more involvement on the front end than has been common in the past.
What does it mean?
It means those looking to start a business need to be more prepared than ever before. You need to know who your competitors are, your location, why you chose that location, how your budget is broken down and why, and how you are going to fill any cash gaps. Put yourself in the investor’s shoes and think of anything they might ask. Have an answer prepared.
Know Your Options
You also need to know your options. In addition to traditional investors and lenders, there are now multiple crowdfunding sources, marketplace lenders, and non-traditional lenders are growing. Explore everything so that you know what you can use, what you cannot use, and what you need to be working toward as primary and secondary sources of funding.