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BUSINESS FINANCE

8 Factors You Need to Consider When Seeking Business Funding

Eight critical factors entrepreneurs should evaluate before choosing business funding options.

Paul Raymond · Contributor·5 June 2017·5 min read

Your Ultimate Business Goal and Milestones

Investors seek ventures with strong potential. Present a clear vision for where your business will be in five to ten years, backed by a solid business plan. Specify both financial and non-financial goals, showing exactly how much funding you need and your intended use of those resources.

Know the Financing Options That Best Suit You

Various funding sources exist: borrowing from friends and family, bank loans, venture capital, bootstrapping and government grants for research-focused businesses. Select the approach that aligns with your business model.

What Value Are You Providing to Your Customers?

Demonstrate that your venture solves a real problem. Investors need to see your company meets market needs through customer reviews and evidence of genuine value creation.

Define Your Product Target Market

Tailor products to fit your intended market's specific needs. Avoid overly niche markets that suggest limited profit potential, but also avoid targeting markets so broad they suggest unrealistic ambitions.

Give Your Business Your All

Investors want evidence of your personal investment — financial and time-based — demonstrating genuine commitment to success.

Consider the Pros and Cons of Each Financing Option

Understand the trade-offs: venture capital means surrendering equity; banks impose late-payment penalties. Develop strategies to manage uncertainties with informal lenders.

Assess Your Potential to Service the Debt

Evaluate your cash flow and capacity for monthly repayments. Calculate the amount you can safely borrow without risking asset loss through default.

Negotiate Well

Use your leverage to secure favourable terms and align with the right investors in mutually beneficial arrangements.

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