Small Business Financing: 7 Steps to Obtaining Growth Capital

There are various ways and sources from which small companies are able to obtain financing but it’s important that you know the steps you need to take and are able to ask the right questions as you move through the process.

1. Look Inward. You need to know exactly what you want and what the benefits are to obtaining someone else’s money. Think about the goals of the company and what you are trying to accomplish and even think in terms of how your business helps your community (what problem do you solve). If you started out with one location for example and you want to expand to ten then it needs to be clear how you are going to do that and what it will coast to get there.

2. Do not underestimate the amount of money needed. Even if you are still a very small enterprise but have big plans make sure that the amount of money requested is in line with your goals. Do not be shy in this matter because funding sources will not see you as being conservative but rather unrealistic and perhaps a poor manager. Highball the number; just make sure it’s reasonable given your need for capital, your going to need the money anyway.

3. Get Organized. Now that you know what you need the money for and how much you need it’s time to start talking to people that can help. You will want to set an appointment with your accountant and get your financial statements in order. This applies to both your business and personal financial statements. If you have CPA audited financial statements you are ahead of the game and your eventual funding sources will greatly appreciate that level of seriousness and organization. You need your personal financial information prepared as well because you never know what type of documentation a lender or equity investor will require. Side Note: Do not make the mistake of believing that because the money is for your business that there will be no lien requirements on personal assets such as your home.

4. Meet Your Banker. You know what you want, need, and have the information to back it up. Your banker will be pleasantly surprised to see you so prepared and organized. Your first meeting should be exploratory where you discuss your plans and needs and the bank provides some information on their capabilities. They will most likely ask for the last two year end and interim financial statements and possibly tax returns. Give it to them to analyze and come up with ideas. Your banker can be a wealth of knowledge and great contact source for other service providers even for other funding sources since your bank cannot do everything.

5. Small Business Development Centers. If you have Small Business Development Centers in your state they can be a great resource for obtaining contacts and information. In my state, Maryland, we have an excellent center with branches throughout the state. Here you can schedule appointments with a counselor who can help guide you through the process of obtaining capital and answer questions along the way offering advise on various business matters. It has been my experience that these are very experienced and knowledgeable counselors and not just some half baked state run program. You should schedule an appointment and go meet with them.

6. Get referrals. Your accountant, banker, business counselor, and other business owners all have contacts that expand beyond the bank when it comes to financing. Yes, even your banker will be happy to provide you with contacts for alternative sources of financing that go beyond the banks abilities or risk parameters. He will do this to keep you happy and coming back to him for all your banking needs. Your accountant is constantly bombarded by third party funding sources seeking referrals so he should be very aware who the various players are that cover your market.

7. Invest Wisely. By now you should have at least one commitment letter on the table that will outline the terms of the deal. If you follow these simple steps the funding process will move quickly and smoothly. Once you do, make sure you leverage those funds for maximum profits so that next time the financing process will be a walk in the park.

By Bill Ryon
Bill Ryon is a business finance expert living in Maryland. He has helped dozens of companies from coast to coast obtain the most advantageous forms of financing leading to greater opportunity and profits. For more information you may send questions via email to wgryon26@comcast.net Website and newsletter coming soon.
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