Sponsored by Kabbage:
Studies show time and again that it’s more difficult for women entrepreneurs to get cash to start new business ventures or expand their existing operations than it is for male entrepreneurs. To improve your chances of securing financing so you can reach your business ownership goals, follow the five steps below before you approach anyone with your financing request.
1. Set up a Business Entity
If you’re a sole proprietor, then you don’t technically have a business. To show you’re truly serious about growing your business, you need to actually have a business. That means you need to set up an LLC or s-corp as soon as possible.
The business structure you choose depends on a variety of factors. For example, do you want to get investors in the future and give them shares of your company? If so, then you need to set up an s-corp.
Learn the pros and cons about business structures and form the type of entity that positions you to reach your long-term goals because changing your business structure in the future isn’t always easy.
2. Separate Your Business and Personal Finances
It will be very hard to obtain any kind of financing if you can’t show your financial history. If you’ve been operating your business for a while, then it’s essential that your business and personal finances are completely separate.
That means separate bank accounts and separate credit cards and never the twain shall meet. Make sure all of your income and expenses are properly tracked and categorized!
3. Establish Business Credit
Most lenders want peace of mind that you’re a safe investment. They want to know that your business can repay the cash they provide to it. They’ll look at your business credit history to ensure you’ve been a responsible borrower in the past.
As a starting point, get a business credit card and use it for small expenses. Pay the bill off in full every month to start building a positive credit history.
4. Write a Business Plan
Another way to prove to lenders that you’ll be able to pay them back is to write a solid business plan that shows exactly how you’ll use the money they loan to you and what the results of those investments will yield.
No one will give you cash just because you ask for it. It’s up to you to prove that giving money to you rather than anyone else is a safe and smart choice. A business plan shows that you’re extremely serious about your business and you’ve thought through a clear plan for success.
5. Explore Your Options to Get Cash
Once you have all of your ducks in a row, it’s time to seek out a lender or investor. There are many financing options available, so do your homework! Research the various loans for women entrepreneurs and grants for women-owned businesses.
Are you open to bringing in angel investors? Rather than simply loaning you money that you’ll pay back at a later date, most angel investors expect to be paid back and get an ownership stake in your company. Spend time researching the angel investment process as well as potential angel investors and create an investment pitch that makes them want to back you, your business, and your plans for the future.
Follow these steps and your chances of obtaining the cash you need for your business will increase significantly. The preparation work you do before you approach a lender or investor goes a long way to helping you get a positive response!