How to attract financing

Financing may be required at any stage of business development - both at the stages of its creation, and at the stages of the emergence of new projects, changes in its concept. Two of the most common and frequently used ways to attract financing can be working with a bank (loan) or with an investor.

Instruction manual

1

To choose the best way to attract financing, analyze the current state of your business. Answer the following questions:

1. how much money is needed for your needs (to create a business, rebrand it, expand, etc.);

2. What funds are available for this from you;

3. after what time can you return the funds invested in your business;

4. What are real opportunities to attract financing (for example, an account with a bank has been opened).

Depending on the answers to these questions, choose the method that is most suitable for you at the moment.

2

If you have chosen to take out a loan from a bank, approach the choice of a bank as carefully as possible. Do not trust too aggressive advertising of this or that bank. Take time and chat with specialists from the largest and most reliable banks. Find out everything you need with specialists, and not through the information posted on the sites.

3

To get a loan, submit to the bank documents of your business and its founders. A package of documents, as a rule, always includes financial statements (of course, if the business is already underway), constituent documents of a legal entity, decisions adopted by its founders over the past year, and a business plan. Foreign banks have the highest requirements for documents, but they are more reliable, and their loan rates are usually lower. Upon reaching agreement, issue a loan agreement with the bank.

4

A common way to attract financing is also to search for an investor. Start by identifying groups of investors that your business might be interested in. The more developed the business, the more such groups. If you have just recently become an entrepreneur, rely mainly on acquaintances or on business incubators.

5

After you select several potential investors, write a letter to each of them with a description of your project and specific proposals regarding participation in it. Send these letters and make sure that the recipients have received them.

6

Surely at least one potential investor will respond to your letter and invite you to meet for negotiations. Prepare a presentation about your business for this meeting. It should be brief, but informative, it is important to tell in it not only about the product or service, but also about your team, because a lot for the investor depends on the team working on the project.

7

If the negotiations were successful, complete all your agreements in writing using an investment memorandum. This is a document that includes information on the terms of financing, your obligations to the investor and his obligations to you.