Did you know in the United States, currently, there are 32.5 million small businesses and firms running over there? But you know what's the more interesting fact? They could make up 99.9 percent of all the firms or businesses in the United States.
However, in the middle of the pandemic, the number had reached the top. While some companies closed down during the initial stages, numerous aspiring entrepreneurs proceeded to establish their own small businesses later on. Worse luck! In the prior year, 20% of small businesses fail; while 50% of small businesses shut down within the first five years of operation, a significant 80% of them experience business failure due to cash flow problems.
It may look like a piece of cake to see small businesses and startups seeking financing to launch their business. But the reality is something else. Fortunately, there are various ways to get business financing for startups. However, there is one more reality check! Errors in judgment could result in losing the funding necessary to initiate your business.
But don’t worry! We have come up with 4 points that will specifically show the common mistake you could possibly make while seeking funding to start your firm or business. So continue reading carefully, as we have also mentioned how to avoid those mistakes.
The first and foremost mistake that is made by most entrepreneurs is that they come up with no strategy and planning. So the very first thing you need to do is just sit down with your accounting experts to evaluate your cash flow and make financial projections for the upcoming years. Just check even if the financing will prove beneficial for your business or not in the long term and if you are capable enough to repay your loan.
After going through analyzing your business condition and setting a blueprint of financial planning, it is time to seek the potential funder, whether it is an investor or lender. There are specific procedures that you must follow while seeking startup business financing, especially when it comes to small businesses and startups. This procedure includes “Establishing your niche market, conducting thorough research on potential funding options, and engaging the services of an appropriate lender or investor”. But it is unfortunate to say that certain entrepreneurs may hastily secure financing without undergoing adequate screening and selection procedures.
There is a particular time to get finance for your business. As we have mentioned in the first point, you should go through your examining the business finances and set financial planning. Along with this, you must check if crowdfunding is right for you or whether there are any grants that your business is eligible for. Unluckily, there are such things in financing that go too early. Although pursuing financing at the earliest opportunity may be tempting, it is crucial to have a well-structured business plan in place to make informed choices.
For your tech startup, you might look for funding for grants or submit an application for a Small Business Administration (SBA) loan. Although, there is one suitable option for you, and that is equity financing or equity investment. Now what is it? Equity financing is a kind of fundraising where you trade a stake in your company in exchange for funding. It's a great method to secure financing for your business. But there is a twist! Giving up over-limit equity may eventually prove harmful. Why? You can lose control on your business and be restricted to your ability to make business decisions. So do your research first if equity financing is something you're considering.
Seeking business financing for startups can be daunting, but by avoiding these mistakes can make a huge difference in the success of your business. So as an entrepreneur, Think about the seven funding blunders we covered above, and use our advice to steer clear of them.
And if you are struggling with how to get business funding for startups, come to us. We at Sole Source LLC fund business owners nationwide, regardless of industry, credit, or time in business. We have a lot of various financing opportunities available to our clients. Regardless of your situation, we'll have a solution for you.
Get in touch with us now!