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Accessing Capital – Funding and Investment Know-How

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Accessing Capital – Funding and Investment Know-How

Accessing capital is key for entrepreneurs, yet sometimes can be challenging.

Most small businesses begin by bootstrapping, using personal savings or loans from friends and family as funding. This approach provides an ideal opportunity to test out an idea without taking on too much exposure or risk.

At some point in your business’s growth process, additional funds may become necessary. Watch this webinar to gain more knowledge of the local lending landscape and develop long-term relationships with lenders.

Funding Sources

Most businesses, whether large or small, require funding in order to expand and grow. Yet finding access to this capital may prove an insurmountable barrier – particularly among communities who have traditionally faced barriers in business.

There are numerous approaches to accessing capital, each with their own advantages and disadvantages. Some methods may work better for established companies while others might better suit smaller or newer enterprises; such options could include grants, loans or investments.

As part of our partnership with Accion Opportunity Fund (AOF) and Fifth Third Bank, this webinar presents several simple steps that can help your small business secure funds it needs to thrive. Lending experts Shanna McLearn from AOF’s Director of Working Capital & Community Partnerships Shanna Williams of Partnerships Manager from AOF Adriana Williams as Partnerships Manager from AOF Juan Guevara as Small Business Community Lender will guide participants through this process by showing them how to prepare their business for an infusion of capital while also evaluating loan options before effectively navigating various pathways leading towards capital access.

Capital constraints can be an insurmountable hurdle to the growth of any company, yet 83 percent of entrepreneurs fail to secure sufficient funds needed for startup or growth. Entrepreneurship may appear an arena of equal opportunity; however, systemic barriers exist which impede its progress and success for marginalized communities.

Businesses typically rely on profits earned from operations to fund themselves; retained earnings, debt capital and equity capital may also provide funds.

Retained earnings are one form of internal capital generated from operations. Companies can raise additional money either privately through borrowing debt through loans or publicly by issuing debt securities, while equity capital allows investors to purchase ownership shares in a company.

Preparing for Funding

Preparing to seek funding for your business takes considerable time and effort, from conducting your own research on various funding options available to you to understanding any conditions attached. Your ability to qualify, as well as what ownership or control rights may be sacrificed will determine which is the most suitable funding solution.

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Investors will require you to present clean books or have access to an experienced financial expert that can answer their inquiries about your current business model, financial projections and plans for its future; accordingly, key documents like tax returns, bank statements, profit and loss statements and current commercial lease agreements or articles of incorporation must also be available.

Establishing your business as an LLC is important to protecting yourself as the owner from personal liability, as well as setting up the appropriate legal framework that works for your business – something an attorney can assist with.

Prepare a pitch deck that will serve as your presentation when seeking funding, which highlights your company’s history, management team, financial needs and business model. However, avoid over-designing or adding too many images and graphics – investors often review hundreds of pitch decks at once and are looking for compelling narratives.

An essential factor when raising capital for a startup company is calculating how much capital you require, since this will determine the ratio between equity or debt you give up and money being given back; it also impacts ownership percentage and consequent valuations, so taking care in calculating what amount you require (both now and for future requirements) to avoid overfunding of any one round.

As a general guideline, when raising capital for your business it should cover reaching key milestones – like profitability or the next funding round, typically 12- 18 months down the line. Be careful not to overfund as this can pose cash flow problems and underfund as this could create serious issues later.

Finding Funding

One of the greatest challenges startups face when expanding operations is accessing capital to help fund the next phase of expansion. Hiring additional staff, buying equipment or starting marketing campaigns all require additional funds – but many entrepreneurs are unaware there are creative methods of raising this capital to take their business forward.

Bootstrapping is one of the primary methods entrepreneurs use to gain access to capital, enabling them to gain experience while keeping debt and equity levels at low levels.

One possible option for raising funding is approaching friends and family for support; this must be evaluated carefully to ensure all those involved understand the risks involved with investing their hard-earned cash into your startup, and legal documents in place to prevent any misunderstandings or disputes later on.

Bank loans are another effective funding strategy for startups. While competitive and difficult to secure, they provide entrepreneurs with access to capital markets while maintaining ownership and control over their business. Furthermore, bank loans can serve as an effective supplement when combined with crowdfunding as funding strategies.

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Government grants and special loans provide another method for entrepreneurs to gain access to capital. While these options can be highly competitive and require extensive research, they offer entrepreneurs the unique chance of accessing money without giving away equity or ownership stakes in exchange. Furthermore, this type of funding allows entrepreneurs to test out their idea before dedicating significant time and resources towards making it real.

Getting Funding

Accessing capital is essential to business expansion, yet many entrepreneurs find themselves having difficulty accessing it. In this webinar, lending experts from Accion Opportunity Fund (AOF) and Fifth Third Bank will offer tips for preparing your business for an influx of funding, assessing loan options, and selecting one that’s the right one for you.

One of the first steps towards seeking investment for your company should be creating materials such as a financial projections spreadsheet and business plan, in order to understand what you need and why. These tools may also prove helpful when pitching to lenders or investors for funding. In addition, take an inventory of your personal credit situation; make sure all outstanding tax payments or liens have been cleared up prior to seeking financing solutions.

Consider using personal savings or assets such as home equity to invest in your business. This approach can be particularly advantageous for young business owners seeking to avoid giving up any ownership stake or incurring debt; additionally, this may serve as an efficient means of getting their venture off the ground.

Your business might also qualify for loans from local, state and federal government programs as well as private lenders like banks and credit unions – these could provide the funds it needs without draining personal savings accounts directly. But for these types of loans to work you will need an excellent business plan and financials in place so as to be approved.

Venture capital firms may also provide an option for funding your business. Venture capitalists tend to take more risks with cutting-edge ideas and provide critical funding for high-growth enterprises; however, they typically demand a stake in your business in return for providing financial backing – so the two of you must work closely together on its future direction.

Before making your choice of business funding source, it’s crucial that you carefully weigh its advantages and disadvantages. With proper planning and preparation, you can secure enough financing to enable the expansion of your venture.

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