Here are a few helpful ideas for what you can do to set yourself up for success:
- Decide What Type of Business You’ll Open
In addition to an entrepreneur’s personal financials, the kind of investment they make influences the type of financing they can secure. Franchises and existing businesses have different funding options than more traditional entrepreneurial startups. Unless they go for venture capital, entrepreneurs (the more classic definition) may need to explore other alternatives like unsecured loans, rollovers for business startups or crowd funding. All businesses (and their owners) will need a phenomenal personal financial record; rock-solid financial model; and business plan.
- Get Pre-Qualified
Once you have a handle on realistic funding expectations, you can begin setting your plan into motion. You’ll also get direction on what documents to collect which include two full years of tax returns, your last two bank statements, your personal net worth statement and your credit report.
- Make Good Credit Decisions
You’ll really want to be careful about your personal credit actions as you’re searching for business funding. For instance, avoid big purchases at this time, unless you need to buy a home. You also shouldn’t carry a credit utilization rate of more than 40% on any of your credit lines and you shouldn’t apply with multiple financing sources. Credit inquiries can affect your score and jeopardize your chances of getting funded.
- Build Your Team
Don’t do this alone—now is the time to find a smart CPA, an experienced attorney and a franchise or business transaction expert. And of course, a financial firm.