Debt and Equity Financing: 6 Tips to Increase Your Chances to Get Financing for Your Start-up Business – Debt and equity financing are basically the two types of financing your business.
Equity financing is a practice of selling portions or shares of a company to outsiders in order to raise money. It can be received at any point in a business’s life. However, most investments are done in the early stages of the company. And any entrepreneur can avail of equity financing. But those that are high-risk with the potential for high returns are preferred. Equity financing can be obtained from various sources. Investors range from private individuals, called angels, to venture capital firms. But entrepreneur who want to avail of equity financing should prepare a solid business plan or business proposal showing the company’s potential.
Debt financing is a way to finance a business wherein money is borrowed from a creditor or lender, which the borrower has to pay back according to the agreed upon payment terms. The creditor can be a person, a bank, or a microfinance institution and other informal lending firms.
These two types of financing your business maybe difficult to obtain if you are getting your first time business loan. But you can increase your chances to get debt and equity financing by following the 7 tips below:
1. Start off with a product or service that is likely to generalize buzz in the industry.
2. Remember innovation is important – as long as it is viable and sustainable.
3. Create an atmosphere of potential by having a solid and creative workforce.
4. Prepare the business proposal that includes actual figures and statistics.
5. Know your stuff because the biggest asset of an entrepreneurial venture is the entrepreneur.
6. Be honest in what you claim when making a proposal. Investors are smart and likely to spot exaggeration.
Certainly, by following these 6 easy tips, you increase your chances to get debt and equity financing.