If you are a small business owner, you probably know how difficult it is to get finance for business, particularly for a first time small business entrepreneur. No need to hold off your dreams just because you are unable to get funds from bank or other sources. If you are unable to get a business loan, yet you are sure your business idea is going to work, you can turn to your friends and family for getting some funds. Taking money from friends or family is always considered a risky business and you have to be very tactful as well as truthful so that you don’t jeopardize your relation with them.
But you need to take the risk and go ahead with your plan if you want your dreams to come true. Here are some tips to help you get some cash for your startup:
1. Seek the right time:
You need to be patient and wait for the right time to ask for money. You cannot exploit a happy family moment to ask for money. Never ask for money when someone had a bad day or a fight, chances are you won’t be helped.
2. Show your faith and passion:
When you ask for money and tell them about your business plans, show optimism and faith in yourself. If you say stuff like that ‘I will try but’ you will end up having no money at all. So just stay upbeat, be very confident and share with them a colorful positive picture of your vision. Remember that no one will believe in you if you won’t believe in yourself.
3. Be Respectful and keep the right attitude:
If you are asking for their input in your dream and the project, they will obviously get involved and give you suggestions. So listen their suggestions, keep them updated about your project details and show respect if they stay around you. No one wants to see their money going down the drain so if you are actually taking their money, you are giving them a right to get involved.
4. Present a complete plan:
Nothing gets the confidence of a person than a neatly written down well sorted plan. If you want to go an extra mile to get the confidence of your family and friends, take the pain of planning out in a well-written format. You will surely impress them with your planning and dedication.
5. Sign an agreement:
Most people overlook this important point while dealing with friends or family, but let me tell you, it will save you in tough times. If they agree to give you some amount of cash, write down the agreement clearly, set down rules and mention the risks. Get it signed in the front of at least one informal witness.
6. Choose someone who can afford to lend:
When approaching a friend for money, make sure they can afford to lend or lose the money. Do not get the money from someone in dire need of cash themselves. Also ask for the minimum amount not the maximum.
Always keep the above points in mind before approaching a friend or family member for a loan for business. We all know how relationships can be ruined if one is not careful and not invested enough in the new business idea. Don’t ever make that mistake!
Ok, so you have started your small business. Now comes the tough part- running your business smoothly and effectively. You need to have a basic money sense to do that. You don’t really need to get an accounts degree for having a good money management sense. You just need to know the basics of money handling. If you can afford an accountant, nothing can be better than that. But there are several aspects of money management that you should keep in mind to keep a check on what your accountant has been doing. You really don’t want a high debt and a negative balance sheet in the long run.
So let us understand some money principles to follow:
1. Book keeping knowledge :
Let us start with some book keeping knowledge. As stated above, you don’t need to have a degree in accounts but a general knowledge is a must to keep your business engines in fast gear. The best entrepreneurs keep themselves armed with the knowledge of money basics. You just need to know about cash flow, inventory management, assets and liabilities, how your credit card works, how to read a balance sheet and income statements. All these important aspects should be on your fingertips for gaining an insight into your money flow.
Most of the people I know don’t care about the importance of good banking. Your business’s actual financial health is going to depend largely on your bank. You bank’s offers and usage, its maintenance fees, cash withdrawal fees, online banking facility, interest rates and overseas draft fees will surely suck up your budget if you don’t choose wisely. Use a bank specifically providing services for small business if you can have the option. This will benefit you in a lot of ways.
3. Assets and Liabilities:
So, what is an asset and what is a liability? An asset is anything which is helping you bringing in cash. Liability is anything which is exactly the opposite. Office furniture is a liability while your product is an asset. If you concentrate on how to develop assets and decrease liability, you will definitely stay on the money management success road.
4. Credit management :
Credit money is the plastic money which has been replacing the old money payment methods like check and cash. It is quite important for online entrepreneurs to use credit cards for payments. All you need is to open a credit merchant account. But your fees will be calculated with your business’s credit score. So keep a healthy credit score. Also the credit score of your business will impact widely on your options for taking interest. Low credit scores often result in the refusal of loan or higher interest rate. So if you are using a credit account, try making payments on time for the future of your business.
And last but far from least you should have a budget. No business, home or country can run without a proper budget. You can use accounting software to make budgets which are very accurate and easy to use. If you are bootstrapping, you can search for some free accounting software or get good software for a very small amount (far cheaper than hiring an accountant). You should set aside some money for taxes as well as plan in advance for some anticipated big expenses like upgrading software/computer, office renovation etc.
Having a proper financial system in place will avoid unpleasant surprises in future.