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Funding Your Business

this is all about the ins and outs of business funding and financing. So now we have our business budget together, we're ready to go get some money, we know how much we need to make, we know how much we need to spend in order to grow now, this is where a lot of entrepreneurs get kind of caught up, right? So back in the day, you wanted a business, you go, you wanted to get your business funded. The first thing you would do is create a super long 50 60 page business plan and walking around to all the banks that you can find in your neighborhood now, that has slightly changed because it's a lot harder to get funding from traditional banks, although it's still very possible, it's not as easy as it used to be and the good thing with this or I guess the kind of upside from it, there's a lot of new businesses that have been created which makes getting funding a lot easier. So some of the places that you can look to when you're looking for business funding is still traditional banks, you can a...

lso look at invoice in revenue based funding and these could be really awesome places like a cabbage or maybe even a Paypal, which will give you funding based on the money that you're already bringing in and the cool thing about these types of companies is most times they won't even look at your credit squared all their funding, you specifically based on the history of your sales. Another place that you can look at is pitch competitions, we are in this pitch competition era. There's pitch competitions going on every day every weekend and if you can find the ones that cater to your specific market or niche, there's a lot of chances that you can go in and win tons of money. Sometimes you may have to give up some equity, but when tons of money to get your idea funded another places, angel investors and venture capitalists. Now this can be a little bit more difficult because you have to go out and meet these various angel investors um and you also have to go out and find the venture capitalists in the VC firms that are willing to hear you and allow you to pitch for money and in these cases a lot of times you are giving up equity which is a part ownership of your company, another places accelerators and incubators, these can be a really great place for entrepreneurs, especially if in the tech space and in various other spaces as well, because these accelerators and incubators will not just give you money, they will also take the time to educate you as well. I was previously owner of a financial technology company as well and we were able to enter into an accelerator program in boston and it was great because they gave us funding but they also took the time to educate us on how to get additional funding, how to scale and grow the company and we were able to dedicate three months specifically just on this business. So it was a really great opportunity and it's a great way for you to get additional business education. But in addition to get the funding and the connections and networking that you need to effectively grow your business. Now, when you're looking at these different sources of funding, one of the things that you're gonna have to do is prove your income, prove that you are out here making money. So these are a couple of things that most um, sometimes incubators banks, um, and even other various funding sources will want you to show them so that they can see that you're Actually doing what you say you're doing within your business. So one of the ones is bank statements as you know, if you're trying to buy a house or do many other things, you have to show your bank statements a lot of times what they're looking for is 3-6 months of bank statements. And with these bank statements, what they're trying to see is that you're making the money that you said that you're making, they're also looking to see that you're not over drawing the account that you're not overspending, that you're not co mingling and you're paying your rent for your personal house out of your business account and things of that nature as well. So you're looking for about 3 to 6 months of bank statements and I saw entrepreneurs all the time before you go after funding, make sure that you are being or keeping your bank account healthy for these time piers before you go and get it because you do not want to go and approach the one for funding and your bank account has been all jacked up for the past few months. Another thing that people are looking for is profit and loss statements. So profit and loss statements are great because basically what it shows, it's kind of like that business budget and that financial foundation that we talked about it shows exactly how much money your company has been bringing in. But it also shows where or how much you have in expenses. Now one red flag for all investors is if you're bringing in money, but you're expending way more money than you're bringing in every single month. Right. People ask you what your burn rate basically. How much money are you burning through every single month and a lot of our favorite companies took some time to become profitable. So it's not necessarily the biggest, Oh no, but they want to see that you're not wasting money on things that don't need to be, um, that don't need to be wasted on as you're trying to grow your business. Another thing that companies will want to see is financial projections and what financial projections are, is basically sometimes a 2 to 3 year term of what you think your business will make over the next two or three years before that specific time period now, financial projections can get kind of kind of tricky because there's real financial projections. And then there's what I like to call fantasy financial projections. And I've met with tons of entrepreneurs who show me financial projections. And I'm like, there's no way in the world that you're going to get from making a dollar to making a million dollars in the next six months unless you have some magical strategy. And if that's the case, you need to be selling it because that would totally get you there. But either way you want to make sure that you're being realistic, that all your numbers make sense, that there's a steady increase in your income and also in your expenses that match it and not that you're just trying to wake up and say, hey, I'll have this amount today and be a millionaire by tomorrow. So you want to make sure that your financial projections are realistic. And I tell entrepreneurs all the time. You can also take these financial projections, show them to a financial planner, show them to, you know, angel investors or people that, you know, who are in this space to see if there's something that looks realistic. This is also why accelerators and incubators can be a great place to get that education that you need. So that you can be completely prepared when you start approaching potential funders now, let's talk about business credit. So when it comes to business credit this is an area that a lot of people just don't quite understand. So when it comes to business credit believe it or not, there are actually six main credit bureaus. Now I know for our personal finances we pretty much have three main credit bureaus, Experian, Equifax and Trans union. But when it comes to our business credit and I remember when I first found out about this I was super surprised there's six of them. So we have done in Bradstreet we have business credit usa experience business quarter era small business exchange and also Equifax business now done in Bradstreet is kind of the main person when it comes to credit bureaus. But all these other people are also reporting on your businesses credit history as well. Now when it comes to your business credit there's a score of from 0 to 100. Now I know with our personal credit it can start I think it starts around 3 now the highest you can have is at 8 50. So back in the day everyone's goal is to be in the 700 club. Now we're all trying to get to the 800 club. So when you finally do pull your business credit, if you see a score of like 70 don't freak out because it's not like our personal score a 70 is almost like a C having a C in school. So basically the like I said the rating is from 0 to 100. So if you're in that 80 and 90 range, that's great. That's a to B. Credit. This image shows you what a business credit report looks like. So as you can see it's very similar to our personal ones but it's focusing a lot more like I said specifically on your business, you know if you're using your accounts wisely paying your creditors on time, all those amazing things. But all this information is specifically for your business in this image right here shows what a Dun and Bradstreet um Credit report typically looks like now if you're just starting your business you're trying to figure out how to get your business credit started. There's a couple of things that you want to do. The first thing is you want to obtain an employer identification number. So if you registered your business as an LLC or corporation or whatever it may be nine times out of 10 it usually will come with an employer identification number. If you do not have an employer identification number or E I. N. Number you can go to I. R. S. Dot gov and look for the E. I. N. Tab and actually go online and get yours for free. You can have it literally in five minutes. The next thing you want to do is get a duns number like we just mentioned a few minutes ago done stands for Dun and Bradstreet. And so they, that's basically their credit number. So you go to Dun and Bradstreet dot com and you obtain your duns number and then the next thing you want to do is open a business checking and or savings account so you want to make sure that you do this so that you're keeping your business and personal finances separate. But in addition to that, when you have your business checking in your business saving, some banks will allow you to get a line of credit that supported by your business savings account. So that basically means that if you put $2,000, let's say into your business savings account, they will often extend you a line of credit that same amount so that you can go out and use those funds to grow your business. Another thing you want to do is open a business credit card or a secured business credit card. So if your personal credit isn't in tip top shape, you can totally go and open a secured business credit card. And with the secure business credit card, what will happen is you'll put a deposit down and essentially they'll match that deposit dollar for dollar and that will be your credit line. But just make sure that you're using your employer identification number um in addition to what you'll have to use the beginning your personal social security number and you're done in Bradstreet number when you're applying for these accounts? Because you want to make sure that these other numbers are being reported to the credit bureaus as well. If you're thinking about pitching and pitching to investors in really seeking out funds from other sources outside of a traditional bank, most investors will want to see a pitch deck, especially if you're in a pitch competition obviously, or if you're applying to accelerator or incubator. So there's a few things that you want to have in your pitch day. First things first, you have to make sure you've identified your target market, as they say, trying to talk to everyone is basically talking to no one. So you want to make sure that you've identified your target market and who it is that you're exactly selling this service or product to. The next thing you want to do is make sure that you have. You're able to clearly explain the problem that you're solving every single business in the world has identified a problem and they're looking to solve it. So make sure that you're clearly explaining what that problem is, that you're solving the other thing is your value proposition. What makes you amazing what makes you better than the other person. Make sure you're able to clearly explain that. And then of course your product, you want to explain what your product is, What makes your product great. How does it work? How much does it cost to make things of that nature. Another thing that you want to think about is the competition, Who else is out there? Who, who are your competitors, who are the people that you're trying to kick out of this arena? You need to make sure that you're able to clearly explain who your competition is now. This is another really important thing business model. A lot of people do not take the time to think about what the business model or the revenue model, what it will be for their business and it's gonna be really hard for you to make any traction revenue wise, if you don't really know where you should be focusing to earn your dollars. So your business model could be a subscription base, It could be selling products, it could be selling services. Um, it could be all different types of things and make sure that you have that model very clearly explained and very easy for someone else to immediately understand how your business makes money. Another thing is traction. Have you been in the news, have you been able to hit any specific sales goals? Have you had any amazing press, whatever it may be, they want to see what traction you've had. Have you released a beta version of your app and it did well, you, and you hit 20,000 subscribers, whatever it may be, they want to see and hear what traction you've made so far in your business, the next thing is your team, right? We're only as good as the people that we surround ourselves by. So you want to make sure that you have a dynamic team and you want to explain who they are and this is your time to brag brag about yourself, brag about your accomplishment, brag about all the awesome people on your team and why you bring them on what makes them so great, why they're such an added value to your team and also just all the accomplishments that they have made so far in their respective careers. Another thing you want to have is your marketing and sales strategy. So as you know, it doesn't matter if you have the best website in the world, the best product in the world, if no one knows you exist, it's like, so no one knows you're there, right? So we've all seen good products, good service is awesome, smart people. But if no one knows they're there and if no one knows that they can buy from you an amazing this that your service or product is, it's almost like you don't exist. So you want to make sure that you're putting an equal amount of time into your marketing and sales strategy as you are into every other part of your business and you want to make sure that this marketing and sales strategy is very clear, it's easy to understand because nine times out of 10, the dollars that you're raising is gonna most time go straight into this marketing and sales strategy to grow your business and not necessarily always research and development R. R. And D. Now last but not least your financials, investors want to know. How much money have you already invested into this thing? How much money have you made so far? How much are you spending? What's your burn rate every month? How much money are you going through? Because they're not going to throw any good money after bad money if you meet with any investor, if they feel like you're already wasting money and this thing is already tanking, they're not gonna throw any additional good money after a bad idea or a bad situation. Now with all things when it comes to financing, I tell people don't be scared and make sure you don't fear failure. Fear, regret. Go out, pitch. Ask for money, build your product, build your service. Trust me. You'll thank yourself later instead of worrying about failing. Trust me.