One of the biggest challenges faced by new entrepreneurs is getting a loan for starting a business.
And for more seasoned entrepreneurs interested in expanding their existing business, it can be difficult to figure out how to get a loan for your small business.
While loan and grant options may vary depending on what country your business is located in, there are some general best practices for securing the funding you need to build a thriving business.
One of the best places to start is by finding a business mentor to help you navigate the process.
Find an expert to help you identify funding needs and sources
While a mentor’s role is NOT to finance your start-up, they can help you understand your own financial needs and navigate the options available to you.
It can be challenging to convince investors or banks to finance your business, but an experienced business mentor can help you get your plan and documents in order and make the best possible impression.
A mentor can also help you brainstorm alternative funding sources, like grants and crowdfunding.
Create a business plan
Anyone providing you with investment, loans, or grants is going to want to know that you have thought through the logistics of starting and operating your business.
Your business plan will help you determine how much funding you need. Include financial projections in your business plan to capture the attention of lenders and investors.
We have more tips on researching and creating your business plan here.
Prepare your business pitch
Your business pitch will be your most powerful tool in convincing investors and lenders to fund your business.
In your pitch, highlight important statistics and numbers and create a visual presentation that you can share with your funding leads.
Be sure to keep your pitch short and to the point to keep potential investors’ attention. Focus on the most important parts of your business and summarize them in an easy-to-understand format.
Utilize your mentor to practice and receive feedback on your pitch. Listen to the advice you get and think about how you can implement that into your business pitch.
Start with your existing networks
Now that you have a business plan and a pitch in place, you are ready to start connecting with potential lenders and investors.
One of the most reliable places to get a loan for your business is from friends and family.
This can also be a complicated place to find financing. Remember that when accepting loans and investments from your network, your personal relationships are on the line.
On the plus side, if you have networks that are able to loan you the money you need to grow your business, they will often come with low or no interest rates.
Look beyond the obvious sources of funding
The state, region, or country you live in will determine what sources of funding are available to you.
While banks might be a great option for securing a small business loan for some entrepreneurs, they are not an option that is available in every corner of the world or to every person depending on personal circumstances including citizenship status, credit history, and other factors.
Traditional sources of funding are a great place to start if they are available to you. This includes funding options such as:
- Venture capital from investors
- Small business loans from banks
- Self-funding with personal savings
If none of these options are open to you, you can also look to more creative sources of funding, including things like:
- Crowdfunding platforms including Kickstarter, Seed Invest, Indiegogo, GoFundMe, and others
- Local, regional, or global grants
A mentor can walk you through the pros and cons of each of these options, help you come up with ideas of places to look and people to talk to, and help you to prepare for conversations with potential funders.
Becoming an entrepreneur is hard work and a big commitment but comes with the potential for huge rewards both personally and financially.
No matter what your initial finances look like, it is important to stay optimistic and keep working toward your dream of starting a business.
With a good idea, a well-researched business plan, a strong pitch, and the support of a mentor, you can find the funding you need to get your business off the ground.
Remember that you are not alone—start searching for a mentor to help you in your journey today.