WHY SOME ENTREPRENEURS ARE STRAINING TO ACQUIRE INVESTOR FINANCING

There are very many compelling business ideas that are yet to undergo execution. Transforming the paper business to running business has been a burden for several aspiring entrepreneurs. What keeps on coming out loudly as a barrier to these aspirations is business financing. Capital for sure is an essential element of a business lifeline, it can only rival analogy of blood to a human being, and without it, you can’t guarantee life. Business financing is critical to all ventures regardless of its nature, size or stage in the entrepreneurial journey. It serves enterprises in multiple capacities from startup, asset acquisition, and operational purposes to business expansion among other venture needs.

Internal and external sources of financing have been the primary avenues and techniques considered by entrepreneurs. Notably, significant factors are always at play to determine the viable financing channel(s) for every business. Bank loans, angel investors, venture capital, are some of the dependable sources for many entrepreneurs. To a good number of business people, successfully acquiring financing from the medium have proved a daunting task. Many have faced endless proposal rejection, disheartening messages/emails, and disinterest from potential investors. Others always succumb to the negativity and loss the hope or join the long list of procrastinators. The strong hearted may take a sizeable amount of time and consistency to get the much-needed financing. These developments bring the vital question that must be considered by every entrepreneur. Why are some entrepreneurs finding it rough to acquire business financing while to some it’s just a smooth ride? What should the frustrated entrepreneurs need to learn and consider differently to boost its funding chances? These revelations form the basis of this article; we must empower each other as a better way of moving forward.

Many bank lenders always shy away from early stages startups, the sustainability fears being the top of such decisions. The financial institutions just like any other financier provide finances to businesses under the agreed condition and getting their money back with interest on top is a significant priority. Other than startups, other ventures suffer the rejection of acquiring loans. According to Spring small business survey 2015, 45% of enterprises have faced bank financing rejection, interestingly, 23% have zero knowledge or idea of their application rejection. Some of the notable shortcoming to several enterprises are;

• Dented creditworthiness; lenders aren’t ready to lose their money to an unreliable client. Credit history plays a lot here, some businesses have many unsettled debts as well as defaults. All these affect the final credit score that guides several lenders in loan allocation or rejection. Entrepreneurs must adequately review their creditworthiness and refrain from unprecedented actions that may affect the credit score before a loan application.

• Collateral challenges; Business must have that asset to reimburse the loan just in case it faces difficulties in repaying. Having not satisfactorily provided for this, lenders keep off such loan arrangements. Entrepreneurs can consider availing business or private properties such as car, land, home where an enterprise may be limited to revamp the collateral documentation.

• Inconsistent cash flow; Loans aren’t there to make businesses bankrupt. Lenders always asses the ability of the company to make loan repayment as well as meeting other business operational expenses with much ease. In situations where business has much cash outflow than cash inflow, it exposes cashflow challenges and business inability to repay loan promptly.

• Unclear and undetailed written business plan presented; without a comprehensive and viable business plan, it becomes a hassle to acquire loan financing. A business plan is vital documentation that every investor will be looking for an investment decision. It shows the commitment and clear understanding of the business, touching on essential avenues from comprehensive market research, business vision, financial projections, financial statements, etc. All these help the potential investor in making an informed decision other than depending on the oral submission.

• Vague/unrealistic reasons for seeking financing from investors is costly; Sounding unclear and unrealistic on why a business needs funding is one of the reasons why many loans get rejected. An investor always is willing to inject funds into business for development purposes that will make a good return on investments. This case will guarantee loan repayment compared to seeking funds for premises beautification purposes.

• External factors interference; many lenders put into consideration business external factors such as economic state, industry trends, the political atmosphere when allocating loans. Whenever they realize any condition that may jeopardize business operation, they hold back to avoid the risk of non-repayment of the loans till when there exist favorable factors to guarantee business confidence.

Amidst all these, a business must work hard and smart to catch the eye of investors and convince them on why they should get that much-needed business financing. Here are quick tips and techniques that entrepreneurs should consider not only to excite but inspire and persuade investors to provide the capital injection;

• Get out the results; Investors aren’t interested in many long stories or presentations, the real deal is showing results, sales & revenues figures and any other proof that your business idea is bound to work. Importantly, it’s very recommendable to get customer base and subscribers before seeking an investor. Customers translate to revenue; entrepreneurs can take this approach through starting small with less capital intensity.

• Networking as an asset; for early-stage start-up entrepreneurs this is a perfect platform, they get out to interact, discuss, pitch their business ideas with much ease. In the networking circles, it easier to get a financier who may be persuaded, convinced or even inspired by the interactions. Linkages can create can as well lead to achieving the same.

• Have partners; Angel investors and venture capitalists are always keen on evaluating the skills, talents of fellow business partners, it’s factual that they prefer businesses with co-founders than the sole founder. A company with a strong and talented leadership team boosts its reliability and sustainability over time despite challenges faced. A dedicated team is one of a surety that investors look for beyond venture’s goods/services.

• Showcase the return on investment; for investors, their ultimate concern is to get a return on investment. Entrepreneurs must, therefore, come out openly to showcase the kinds of personal gains they seek to gain from investing in the business. Proper illustration on how and when the investors will benefit from the returns is the real deal here.

• Optimize the online financing platforms; with the technological advancement, the world has become a global village. Networking is applicable beyond borders and other demographic limitations to the advantage of the business. Entrepreneurs should be quick to pitch their business ideas in the many online financing platforms to acquire potential investors in the industry.

• Invest in knowing your potential investor; it’s critical for entrepreneurs to undertake background research on the potential investor, the kind of businesses he/she likes investing in, spirituality, beliefs among other individual assessment. Understanding investor helps get best out of the interactions and business idea pitching. It also boosts business compatibility and success.

Every entrepreneur must always stay positive and keep pushing on until achieving the desired results. It’s prudent to learn from negatives of business pitching to build a foundation of success. It doesn’t matter how long it may take to seek the financing, but consistent hard work and positivity will spark business glory.