How to Start a Business With the Right Financing

Do you want to start a business? Do you feel that business ownership is right for you? Ready to launch?

Starting a new business can be an exciting but also daunting prospect, especially regarding funding your dream. As a business owner, consultant, and coach, I have seen many businesses succeed and fail due to their approach to start-up capital or reserve capital. I want to share my experience on what it takes to start a business, how to set up business credit reporting, the goals of business credit and funding, and the types of business loans available.

Starting a business takes a lot of effort, dedication, and planning. First and foremost, you need to have a solid business plan that outlines your goals, the target audience that you intend to serve, a good understanding of your competition, and solid financial projections. This plan should be well-researched and realistic and should be used as a blueprint for your business.

Start with a business idea

Building a business is challenging. How can you prepare yourself and your future business for the best chances of success? How should you go about running a successful business?

You need to determine your “whys” for wanting to create a business. Do you want more freedom, a higher potential for income, or more time as your business grows?

Once you figure out the driver, it’s time to brainstorm on the business that will fulfill this need.

Brainstorming a business idea can be a fun and creative process. Starting a business begins with an idea. When brainstorming a business idea, it’s important to keep in mind that the idea should not only be fulfilling and passionate, but also profitable.

The idea should cater to a specific need in the market. The need to be addressed could be a product or service that is lacking in the industry or an existing product/service that can be improved upon. Sometimes it’s better to build on a proven model than to create something unique from scratch. One of the amazing things about being a business owner is that you have complete control over creating and executing your vision.

Identify a problem or need in the market

One of the best ways to generate a business idea is to identify a problem or need in the market. This may involve conducting research, observing consumer behavior, or analyzing industry trends. Once you have identified a problem or need, think about how you can create a product or service that addresses that need in a unique and innovative way. For example, if you notice that there is a lack of healthy food options in your community, you might consider starting a meal delivery service that focuses on fresh, locally sourced ingredients.

Draw on your passions and interests

Starting a business is a lot of work, so it’s important to choose a business idea that aligns with your passions and interests. Think about your hobbies, skills, and areas of expertise and consider how you can turn them into viable businesses. For example, if you are passionate about yoga and wellness, you might consider starting a yoga studio or a wellness coaching business.

Combine two or more ideas.

Sometimes the most innovative business ideas come from combining two or more existing ideas in a unique way. Think about two different industries or products that you are passionate about, and consider how you can combine them to create a new product or service. For example, if you are passionate about gardening and home decor, you might consider starting a business that sells unique, handmade planters and garden accessories.

To ensure that your business idea has revenue-generating potential, consider the following factors:

Identifying the target market is important when developing a business idea. Understanding the demographics, behavior, and psychographics of the target market will help in creating a product that appeals to them. Make sure there is a viable target market for your product or service. Consider who your ideal customer is, what their needs and pain points are, and how your product or service can solve their problems.

Analyzing the competitive landscape should also be done in order to identify other businesses offering similar products or services. Is your market saturated, or is there room for growth? One should consider whether the market of choice is a Blue or Red Ocean.

By studying the competition, businesses can determine how to differentiate themselves and offer a unique selling proposition. Research your competitors and identify what sets your business apart. Make sure that your product or service offers unique value and addresses a need that is not already being met by other businesses in the market.

What are the ways your new company will generate revenue? Revenue streams refer to the various ways that a business can generate income. It’s important to have multiple revenue streams in place to ensure that your business can generate sustainable revenue over the long term.

Are you going to sell products, services, or both? If your business sells physical or digital products, product sales can be a significant revenue stream. You can sell products through an e-commerce website, a brick-and-mortar retail store, or through third-party marketplaces like Amazon or Etsy.

If your business offers services, such as consulting, marketing, or accounting, service fees can be a significant source of revenue. Services can be billed on a project basis, hourly, or on a retainer basis.

There are many ways to generate revenue for your business, depending on the model you choose. The options below may not be available at the beginning of building your business idea, but you can grow your business to provide any of these options that fit your business in the future.

Subscription-based revenue – This can be a product that includes monthly or yearly subscriptions for access to premium content, software, or online tools.
Advertising revenue – If your business has a significant online presence, you may be able to generate revenue through advertising.
Licensing revenue – If your business has developed proprietary products or technologies, you may be able to generate revenue through licensing agreements.
Franchise fees – If your business has a successful business model, you may be able to generate revenue by franchising your business to other entrepreneurs.

Determine Your Business Concept

Determining your business concept is the first step in starting any kind of business. You need to have a clear business idea in mind and determine the kind of business that you want to start.

When deciding on a type of business, it is important to consider your interests, skills, experience, and market demand. Seeking business advice from professionals can also help you make a well-informed decision about the type of business that you should start. Additionally, it is important to consider whether you want to scale your business or start a small-scale business.

With the rise of technology, you may also consider starting an online store or adding an online aspect to your existing business. Ultimately, your business concept will serve as the foundation for your business and guide you towards success. Once you have determined your business concept, it is important to conduct market research in order to validate your business idea and identify potential customers.

Brainstorming ideas, conducting your competitive research, and considering your revenue stream are all part of the market research to help you understand the needs and preferences of your target market, as well as the industry trends that will influence your market.

Your product offer or service delivery will be important to developing a unique selling proposition. This can differentiate your business from competitors and attract customers.

After conducting market research, you should create a business plan that outlines your vision, goals, strategies and financial projections.

Create Your Business Plan

Creating a business plan is essential when starting a small business, as it serves as a roadmap for your new business. A business plan outlines your business model, financial plan, and type of business, and can also help you promote your business. This document highlights your goals, objectives, and strategies, and provides a comprehensive overview of your business.

Additionally, a well-prepared business plan can help you secure funding and investors for your business, as it demonstrates your commitment, knowledge, and expertise. Your business plan should consider:

Legal and regulatory requirements for starting a business in your location
Obtaining necessary licenses and permits
Registering your business with the government
Complying with tax and labor law
Creating your business entity
Branding for your business
Service or product offering and delivery or fulfillment
Creating a Market Plan
Creating a financial plan and budget

Starting a business requires hard work, dedication, and perseverance. While it can be challenging, it can also be rewarding and fulfilling as you see your vision come to life. By following these steps and seeking professional advice, you can increase your chances of starting a successful business.

As your business grows, it is essential to review and update your business plan to ensure its relevance and effectiveness for your business goals. Overall, having a business plan can lead to a successful and sustainable small business.

Choose Your Business Structure

When starting a small business, one of the most important decisions the business owner will have to make is deciding on a business structure.

Business structure refers to how you structure your business entity to legally operate your business. This decision will have implications for taxation, paperwork, and personal liability. There are several types of business structures to consider, including sole proprietorship, LLC, s-corporation, and c-corporation, so it is essential for business professionals or business owners to choose the right business type for their specific needs.

Each structure offers different pros and cons, so business professionals should carefully consider their options before making any final decisions. Whether you’re starting up a new business, expanding, or restructuring an existing business, choosing the right business structure will be one of the most important decisions you make.

A sole proprietor is an individual who owns and operates their own business and is personally responsible for all financial liabilities and debts associated with the business. This type of business structure is the most common and easiest to set up, as the owner has complete control over the business and can make decisions without consulting with others.

However, the owner is also responsible for all profits and losses, income taxes, and any legal or financial issues that may arise. It is the easiest to set up but the most risky in terms of risk exposure.

An LLC, or Limited Liability Company, is a type of business structure that combines the liability protection of a corporation with the tax benefits of a partnership. This should be the choice for most new businesses if you’re serious about building a business.

Essentially, an LLC is a separate legal entity from its owners, meaning that the owners are not personally liable for the company’s debts or legal obligations.

There are several reasons why someone may consider forming an LLC:

Limited personal liability: This is perhaps the biggest advantage of an LLC. Because the company is separate from its owners, their personal assets (such as their home or savings) are generally protected from business debts or lawsuits.
Flexibility in management and ownership: LLCs have fewer formalities than corporations, and ownership can be divided up in different ways.
Pass-through taxation: LLCs typically do not pay taxes at the company level. Instead, profits and losses “pass-through” to the owners’ personal tax returns.
Credibility and professionalism: Operating as an LLC can give a business a more official and legitimate appearance, which can help attract customers and investors. Of course, every business is unique and there may be situations where forming an LLC is not the best choice. Consulting with a lawyer or accountant can help you determine what business structure is best for your particular situation.

Building a Brand

Building a strong brand is essential for the success of any business, regardless of its size or industry. Your brand is the face of your business, and it represents the values, personality, and unique characteristics that set you apart from your competitors. Building a strong brand is essential for the success of your business.

It can help you stand out in a crowded marketplace, build trust and credibility with your target audience, differentiate your business from competitors, and increase customer loyalty and retention.

By investing in your brand and building a strong identity, you can create a solid foundation for your business and set yourself up for long-term success. Here are some reasons why building a brand is important for your business:

Brand recognition: A strong brand can help your business stand out in a crowded marketplace. It can create instant recognition and make it easier for customers to remember and identify your business.
Trust and credibility: A strong brand can help build trust and credibility with your target audience. It conveys a sense of professionalism, reliability, and quality, and can give customers confidence in your business.
Differentiation: A strong brand can help differentiate your business from competitors. It can communicate the unique value proposition that sets your business apart and help you establish a niche in the market.
Customer loyalty: A strong brand can help build customer loyalty and retention. It can create an emotional connection with your target audience and make them feel more invested in your business.
Increased value: A strong brand can increase the perceived value of your products or services. It can justify higher prices and help you attract customers who are willing to pay for quality and expertise.
Competitive advantage: A strong brand can give you a competitive advantage in the market. It can help you win new customers, retain existing ones, and position your business as a leader in your industry.

Here are some steps to help you approach building a brand and marketing your idea:

Define your target audience: The first step in building a brand and marketing your idea is to identify your target audience. This involves understanding their needs, wants, and pain points, as well as their demographic and psychographic characteristics.
Develop a brand identity: Your brand identity is the visual and emotional representation of your business. It includes your logo, color scheme, typography, and overall visual style. Develop a brand identity that is aligned with your values and resonates with your target audience.
Craft a brand story: Your brand story is the narrative that defines who you are as a business and what sets you apart from others. It should be authentic, compelling, and consistent across all touchpoints.
Develop a marketing strategy: Your marketing strategy should outline the tactics and channels you will use to reach your target audience. This can include digital marketing, traditional advertising, content marketing, social media, and events.
Create content that resonates: Content marketing involves creating valuable and relevant content that resonates with your target audience. This can include blog posts, videos, podcasts, and social media content.
Leverage social media: Social media can be a powerful tool for building brand awareness and engaging with your target audience. Choose the social media platforms that are most relevant to your target audience and focus on creating high-quality, engaging content.
Measure and optimize: Measuring and optimizing your marketing efforts is crucial to your success. Use analytics tools to track your performance, identify areas for improvement, and optimize your strategy over time.

By approaching brand-building and marketing strategies, you can create a strong brand identity, engage with your target audience, and build a loyal customer base. Remember to stay true to your values, be authentic and consistent in your messaging, and focus on creating value for your customers. With persistence and dedication, you can build a successful and profitable business. Finding the Right Business Resources.

There are many free and low-cost resources available for new businesses, including:

Small Business Development Centers (SBDCs): SBDCs are a nationwide network of centers that provide free one-on-one consulting, training, and resources for small business owners. They are often affiliated with universities or state economic development agencies and offer various services such as business planning, marketing, and financial management.
SCORE: SCORE is a nonprofit organization that provides free mentoring and education to small business owners. SCORE mentors are experienced business professionals who offer expertise in areas such as marketing, finance, and management.
Business incubators and accelerators: Business incubators and accelerators provide a range of resources and support to startups, including office space, mentoring, networking opportunities, and access to funding. Some incubators and accelerators may charge fees or take an equity stake in the business, but many offer free or low-cost services.
Industry associations: Industry associations are trade organizations that represent businesses within a particular industry. They can provide valuable networking opportunities, resources, and support for small business owners. Many industry associations offer membership benefits such as industry research, access to events, and educational opportunities.
Government resources: The U.S. government offers a range of resources for small businesses, including the Small Business Administration (SBA), which provides access to funding, training, and counseling services. The SBA also offers government contracting opportunities, which can be a valuable source of revenue for small businesses.
Online resources: There are many online resources available for small business owners, including online courses, webinars, and forums. Some online resources are free, while others may charge a fee. Some popular online resources for small business owners include Udemy, Coursera, and LinkedIn Learning.

By taking advantage of these resources, new business owners can access valuable expertise, support, and guidance to help them succeed. It’s important to do your research and choose resources that are most relevant and useful for your specific business needs.

Fund Your Business

Starting a small business can be a daunting task especially when it comes to financing. Thankfully, there are several options available to fund your business. A small business loan is a popular option. It is a type of loan designed specifically for small businesses to help them grow, expand and meet their financial needs.

Another option is a business line of credit which provides businesses with a revolving line of credit that they can draw from whenever needed. Small business grants are also available from a variety of sources such as the government, non-profit organizations, or private foundations. The Small Business Administration (SBA) is another option for small business owners. They offer a variety of services including assistance with finding funding and counseling to help businesses succeed. No matter which option you choose, it is important to carefully plan and prepare before applying for a loan or grant to ensure the best chance of success.

Open a business bank account

Opening a business bank account is an essential step for any new entrepreneur or established business owner. A business bank account is a designated account for all your business finances, keeping your personal and business finances separate.

In order to open a business bank account, you will need to provide the necessary documentation and identification, such as your business license, tax identification number, and legal business name.

A business bank account will provide a range of benefits, including easier tracking of your business expenses, simplified accounting, and greater financial transparency. Additionally, by opening a business bank account, you will be able to accept payments from customers, make payments to suppliers, and manage your business finances with greater ease and efficiency.

Overall, a business bank account is an essential tool for any business owner to manage their finances and keep their business running efficiently.

Get financing to grow your business

One of the key steps in setting up a new business is establishing business credit. Business credit is essential for obtaining financing, securing contracts with suppliers, and improving your overall financial standing.

One way to establish business credit from the ground up is to obtain a DUNS number. A DUNS number is a unique nine-digit identification number that is used to track the credit history of a business. It is assigned by Dun & Bradstreet, a credit reporting agency that specializes in business credit reporting.

Getting a business credit card is a smart move for any entrepreneur looking to separate personal and business finances. A business credit card offers many benefits, including higher spending limits, expense tracking, cashback rewards, and fraud protection. It also establishes a business credit history, which can be helpful when seeking loans or financing in the future.

To get a business credit card, you’ll need to apply with a bank or credit card issuer and provide your business information and financial statements. It’s important to choose a card that fits your company’s needs and offers the best rewards and perks. With a business credit card, you can manage your expenses better and save money on business purchases while building your credit history.

bootstrapping

Starting a business using bootstrapping techniques means that you are starting and growing your business with minimal external funding, instead relying on your own resources and creativity to make your business successful. Here are some strategies to help you bootstrap your business:

Start small: One of the keys to bootstrapping a business is to start small and scale gradually. Focus on building a minimum viable product or service, and gradually expand as your business grows.
Keep overhead costs low: Keeping your overhead costs low is essential for bootstrapping a business. This may involve working from home, using free or low-cost software and tools, and outsourcing tasks to freelancers or contractors instead of hiring full-time employees.
Generate revenue as soon as possible: A bootstrapped business needs to generate revenue as quickly as possible to stay afloat. Focus on generating sales through targeted marketing, networking, and sales efforts. Be creative in finding new revenue streams, such as partnering with complementary businesses or offering add-on services.
Reinvest profits wisely: As your business generates revenue, reinvest those profits back into the business strategically. Focus on areas that will generate the greatest return on investment, such as product development, marketing, or expanding into new markets.
Seek out free resources and support: There are many free resources and support available for entrepreneurs, such as small business development centers, SCORE mentors, and industry associations. These resources can provide valuable guidance and support, without adding to your financial burden.
Leverage personal networks: Your personal network can be a valuable resource for bootstrapping your business. Reach out to friends, family, and colleagues who may be able to provide support, referrals, or business opportunities. Networking events, trade shows, and online communities can also provide valuable connections and support.
Be resourceful and creative: Bootstrapping a business requires resourcefulness and creativity. Look for ways to repurpose existing resources, such as repurposing equipment or materials, or finding new uses for existing products or services.

Bootstrapping a business with minimal funding requires discipline, creativity, and a willingness to take risks. By focusing on generating revenue, keeping costs low, and leveraging resources wisely, business owners can build a successful business without relying on outside funding.

Small Business Loan

Small Business Administration (SBA) Loans: The Small Business Administration offers a range of loan programs for small business owners, including loans for startups, working capital, and equipment purchases. SBA loans are typically easier to qualify for than traditional bank loans and offer favorable terms, such as low interest rates and longer repayment periods. SBA loans are known for their flexibility, which is a major reason why many small business owners prefer them.

They offer several types of loans, including 7(a) loans, microloans, CDC/504 loans, and disaster loans. 7(a) loans are the most popular SBA loans and can be used for a wide range of purposes, including working capital, expansion, and equipment purchases. They can be as large as $5 million and have an interest rate that usually ranges from 7% to 9%.

Microloans, on the other hand, are smaller loans (up to $50,000) designed for startups and small businesses requiring small amounts of capital. They have more favorable interest rates than traditional bank loans and are usually processed quickly. CDC/504 loans are also a popular choice among small business owners, especially those who need to finance major capital expenditures like real estate or equipment. They offer long repayment periods (up to 25 years) and have fixed interest rates.

Disaster loans are special loans that are provided to businesses affected by natural disasters like hurricanes, floods, or fires. These loans help businesses rebuild, repair, and replace damaged property. To qualify for an SBA loan, small businesses must meet certain eligibility requirements, including having a concrete business plan, demonstrating good credit history, providing collateral, and demonstrating the ability to repay the loan.

While there are some limitations to SBA loans, they remain one of the best financing options for small businesses.

Traditional Bank Loan

Term loans are best for long-term financing needs, such as purchasing equipment, expanding operations, or making other significant investments in your business. These loans have a fixed repayment term, and interest rates may be fixed or variable.

Lines of credit are revolving credit accounts that allow you to borrow up to a predetermined limit as needed. They are ideal for short-term financing needs, such as managing cash flow or covering unexpected expenses. Interest rates on lines of credit are typically variable and may be tied to the prime rate.

Bank credit is the total amount of borrowing capacity a business can get from the banking system.

Banks have their own internal way of scoring and rating businesses credit worthiness. They do this through a system called bank ratings. It rates the creditworthiness of a business from the bank’s perspective. A business can get more business credit fast. This is so long as it has at least one bank reference and an average daily account balance.

The balance must be of at least $10,000 for the past three months. What lenders REALLY want to see is that a business has this $10,000 average balance. When a business has this, it yields a Bank Rating of Low-5. This means the business has an average daily balance of $5,000 to $30,000.

A business with a balance of $7,000 to $9,999 will net a lower rating like a High4. This will make it harder for that business to get approval for bank financing.

Here is the actual bank rating scale, so you can see where your business may rank:

High 5, account balance of $70,000 – 99,999
Mid 5, account balance of $40,000 – 69,999
Low 5, balance of $10,000 – 39,000
High 4, balance of $7,000 – 9,999
Mid 4, balance of $4,000 – 6,999
Low 4, balance of $1,000 – 3,999

Taking these steps will assure you have an exceptional bank rating. That way, you can get approval for the most bank financing.

Crowdfunding

Crowdfunding has become a popular way for entrepreneurs to raise capital for their businesses. Crowdfunding involves raising small amounts of money from a large number of people, typically through an online platform. Here are some steps to help you raise money for your business using crowdfunding:

Choose a crowdfunding platform: There are many crowdfunding platforms available, including Kickstarter, Indiegogo, and GoFundMe. Choose a platform that is well-suited to your business and target market.
Set your fundraising goal: Determine how much money you need to raise and set a realistic fundraising goal. Make sure to take into account the costs associated with running your campaign and delivering rewards to backers.
Develop a compelling pitch: Your pitch should be concise, clear, and compelling. It should clearly articulate the problem your business solves, your unique value proposition, and why people should support your campaign. Use high-quality visuals, videos, and other multimedia to help tell your story.
Offer attractive rewards: Offer rewards that are attractive and meaningful to your backers. Rewards can range from early access to your product, exclusive merchandise, or personalized experiences related to your business.
Build a network: Build a network of supporters and advocates for your campaign. Reach out to family, friends, and colleagues to help spread the word about your campaign. Leverage social media and other online channels to reach a wider audience.
Engage with your backers: Engage with your backers throughout your campaign and provide regular updates on your progress. Respond to questions and comments promptly, and thank your backers for their support.
Fulfill your promises: Once your campaign is successfully funded, make sure to fulfill your promises to your backers. Deliver rewards on time and communicate any delays or issues promptly.

Crowdfunding can be a great way to raise money for your business, but it requires careful planning and execution. By choosing the right platform, developing a compelling pitch, offering attractive rewards, building a network of supporters, and engaging with your backers, you can increase your chances of success and raise the funds you need to start or grow your business.

Find Investors

Financing a business with investors’ backing can be a great way to raise capital and grow your business. Here are some steps to help you finance your business with investors backing:

Develop a solid business plan: Your business plan should clearly articulate your vision, strategy, and financial projections. It should include details about your target market, competitive landscape, and revenue streams.
Identify potential investors: Identify potential investors who are interested in your industry or have a track record of investing in similar businesses. Reach out to them and pitch your business idea.
Develop a compelling pitch: Your pitch should clearly articulate the problem your business solves, your unique value proposition, and why investors should support your business. Use high-quality visuals, videos, and other multimedia to help tell your story.
Offer attractive terms: Offer attractive terms to investors, such as a fair valuation, equity stake, and a clear path to return on investment. Be transparent about the risks and potential rewards of investing in your business.
Negotiate and finalize the deal: Once you have identified potential investors and received interest, negotiate and finalize the deal. Work with a lawyer to draft a comprehensive agreement that outlines the terms of the investment.
Maintain communication and transparency: Maintain regular communication with your investors and keep them updated on your progress. Be transparent about any challenges or issues that arise, and be proactive in addressing them.
Deliver results: Deliver on your promises and generate results that exceed expectations. This will help build investor confidence and increase the likelihood of future investments.

When financing a business with investors backing, it’s important to choose investors who share your vision and values, and who can provide strategic guidance and support. It’s also important to maintain a positive relationship with your investors and to honor your commitments. By following these steps, you can successfully raise capital and grow your business with investor backing.

Venture Capital

Venture capitalists invest money in startups in various stages of development, ranging from early-stage to later-stage companies. They typically seek out companies that have unique and innovative ideas, market potential, and skilled management teams. In addition to funding, venture capitalists often provide strategic guidance and industry connections to help the company grow and succeed.

The process of securing venture capital funding can be highly competitive, as investors receive numerous proposals each year and carefully evaluate each one based on a range of criteria. Startups looking to secure venture capital funding must have a solid business plan, a clear vision for growth, and a compelling pitch that showcases their potential.

While venture capital can provide significant financial resources to fuel growth and expansion, it also comes with certain risks and challenges. Venture capitalists expect a high rate of return on their investment, and may pressure startups to prioritize growth over profitability. In addition, startups that depend heavily on venture capital funding may struggle to maintain their independence and autonomy.

Despite these challenges, venture capital remains an important source of funding for startups with high growth potential. With the right combination of vision, strategy, and execution, startups can leverage venture capital to take their businesses to the next level and achieve long-term success.

Take the Leap

Starting your own business can be both exciting and challenging, but it can also be one of the most rewarding experiences of your life. By taking the leap and starting your own business, you have the opportunity to pursue your passions, build something of your own, and create a better future for yourself and your community.

To start your own business, you need to have a clear idea of what you want to achieve, a solid business plan, and a willingness to take calculated risks. You also need to be resilient and adaptable, as you will face many challenges and obstacles along the way.

One of the most important steps in starting a business is to research and understand your market. This involves identifying your target market, analyzing the competition, and developing a unique value proposition that sets your business apart from others.

Another key step is to secure funding for your business. This can involve bootstrapping your business, seeking out investors, or applying for loans or grants. It’s important to choose the right funding source that aligns with your business goals and values.

Building a strong brand and marketing your business effectively is also crucial to your success. This involves creating a strong visual identity, developing a compelling brand story, and leveraging digital and traditional marketing channels to reach your target audience.

Finally, it’s important to surround yourself with a supportive network of mentors, advisors, and colleagues who can provide guidance, support, and accountability as you navigate the challenges of entrepreneurship.

In summary, starting your own business requires hard work, dedication, and a willingness to take risks. But by following these steps and pursuing your passions, you can create a successful and fulfilling business that makes a positive impact in your life and in the world. So don’t hesitate – take the leap and start your own business today!