Many people apply for business loans but they are clearly not prepared. They don't know how much they really need or what they will do with the money then they are shocked when they get turned down. Trust me banks and investors aren't going to do your work.
To get yourself prepared to apply for funding you need to address the Who, What, When Where, Why and How of funding.
"Who" are you and your business? You must understand your business and you have to have this down cold. You need to be able to talk about your market, your competition, your customers and your plan very confidently, without hesitating. If you don't know these things I can guarantee the people you are talking to will take notice.
"What" do you need? Be clear on the amount of funds you need. When it comes to this I typically run into three types of people. First, the ones that don't know anything about structure. They have a general idea of the total amount needed but have no detail. Second, the ones that only have the uses of the funds. Unfortunately, they haven't thought about where they are going to get the money. The third type are the people that understand both sides of the equation. These people are going to be more successful in that they know how they are going to use the funds (Uses of funds) and where will the funds come from (Source of funds). This structure will allow you to simply and clearly layout what your capital plan is for a funder.
"When" will the funds be deployed? You need to think about milestones and the steps to reach those milestones. When you use this approach you should be able to assign dollars needed to various activities and how much you need to get to the next milestone. This will allow you to better understand timing. You may actually be asking for to much or to little depending on when the funds are needed.
"Where" are the funds going? The more detail you have relating to the specific use of funds the better your story will be. Telling a banker you need $20,000 for marketing will mean a lot more if you can break that $20,000 down and explain who will get those funds. This understanding of the use of the funds will help validate your credibility to funding sources.
"Why" do you really need funds? The key here is why do you "really" need funding? Is it for growth or are you trying to cover up a deficiency? Being honest with yourself and subsequently with the funder will make things go much more smoothly. Trust me if you try to cover up something you are going to get caught and your chances of getting money is shot.
"How" are you going to execute? This is really the key. As a small business owner it is all about you and your team's experience and ability to drive the business forward. Show you know what you are doing and you can carry out the plan. You can do everything else right but if a funder doesn't have confidence in you and your team's ability to execute you will not get the money.
Understanding how the game is played will make a lot of difference. Be smart, take control and lead the funding discussion. When you really understand your business and what a capital infusion will allow to happen your odds of obtaining funding will dramatically increase.
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