5 Steps to Financing Your LLC or Corporation

Whether you form an LLC or incorporate your business, your mind will soon turn to the challenging task of financing your new business. Often, this one hurdle is all that stands in the way of entrepreneurial success. While financing your new LLC or corporation can seem daunting, it doesn’t have to be. There are actually a number of very reasonable options available to help you start your business, but the real key is planning. The strategy you give a potential lender must make strong financial sense.

Take a quick look at these simple steps below and you will be well on your way to building a sound financial foundation for your start-up business.

Step 1: Know What Your Business Needs

Starting a new LLC or corporation means outfitting it with all of the necessary supplies and materials it needs to succeed-office or manufacturing space, equipment and supplies, inventory, franchise fees, marketing expenses and so on. How much money will you need to successfully launch and maintain your company? Be careful not to underestimate how much it will take. It is easier to get more the first time than to go back for seconds. How much will you invest from your own funds? Are you eligible for grants or government secured loans? How many different sources of funds are available to you?

Step 2: Financing Options

When you think of financing a start-up, you may think first of Venture Capital, Angel Investors and Grants. It is not uncommon for small businesses to overlook one of the most available and likely sources of financing…their own local bank. Not only are they accessible, they are also eager to invest in local projects and may be part of the Small Business Administration’s (SBA) loan program, where the government will guarantee a portion of your loan. All of these options are viable and none should be left out. Research each possibility to determine the requirements.

Step 3: Building Your Case

Almost any lender will require a business plan. Additionally, they will likely require a resume and credit histories from each owner in the company. Your business plan should tell a story to the lender. It needs to explain what your business will do, what resources you have available already, an analysis of your competition, how your business will fill a need in the marketplace and specifically how all of your existing funds and the proposed loan will be used to further your objective.

Step 4: You Are a Salesman

I mean this, so let me say it again. No matter what business you are in…You Are a Salesman! You must be prepared to make a presentation of the facts of your business and loan needs to the lender. In this presentation you will provide the lender with data and forecasts about you and your business. Everything about this is a sales pitch. Obviously, you want to be accurate, realistic and truthful, but you must also be confident and inspiring. Take the time to rehearse what you want to say. If someone asked you for this same loan, what questions would you ask? Prepare answers to these questions and practice your pitch. Consider talking to a lender (or even two) for the loan that is not your main target. Learn from the questions and obstacles they provide you so you are ready when you meet with your targeted lender.

Step 5: What is No?

You are almost certain to hear the word “No”. Your job is to forget that you understand the meaning of this word and not to let it impact your outlook. Learn from your mistake. Ask the lender what could have been done differently. What would he or she like to see in the future if you return? I have countless stories of borrowers who didn’t hear “Yes” until they had visited with countless numbers of lenders. The point is, don’t give up! Once you decide to form an LLC or incorporate your business you have started a journey. There will be bumps in the road, but the rewards are better than any other option.

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