Finance

Five Mistakes to Avoid When Looking for Funding For A Start-Up

Five Mistakes to Avoid When Looking for Funding For A Start-Up

With more and more people going into business on their own the pot of money available to start-ups is getting increasingly hard to access. And with the odds of a start-up business failing within five years somewhere in the region of 75% it is clear that most investors and financial institutions are going to be extremely selective when it comes to handing out seed money to start-up businesses.

The main reason that people get turned down when they’re applying for loans is that they make a number of mistakes in the application process. This article will outline the five most common mistakes and how to avoid them.

1. Expecting the Lender to Take all the Risk. This is the single most common mistake in trying to raise funds. Why should someone take a risk on you if you won’t take on any risk yourself? In addition, if you’re not able to raise any funds at all to start this venture, how much faith in you can you really expect? Ideally, start-up investors like to see the borrower putting in between 30% and 50% of their own money.

2. Not Writing A Professional Business Plan. Many loan applicants will look at the business plan as a formality and just another form to be filled in the application process. This is a mistake. The business plan should be written as a document of intent for your business and a plan not just for the lender, but for you. It should be detailed and outline not just the best-case scenario, but also the worst, it should outline what could go wrong and how you intend to avoid that. It should show that you know your market and your competitors and where your business will be in years one, two and three in terms of profitability.

3. Not including Working Capital in the Projections. As part of that business plan and your application you will no doubt outline the property to be leased, the assets to be bought, the costs of improving your lease property and other expenditures to get you started. What many businesses forget is to also include a realistic figure for cash flow for the first few months while you are getting the business on its feet. Again, this is part of the business plan and the ability to admit that the business might not be cash positive for a little while.

4. Not Conveying your Expertise and Experience. Lenders need to know they can put their faith in you, the person running the business. You might have a good idea but have you got the skills to see it through? If you’ve got the skills, make sure you sell yourself. Include a convincing resume and examples of previous work or experience that will be relevant to this business. Also do the same for any other members of your team you might be bringing on board.

5. Don’t Fall to Pieces in the Presentation. Meeting the lender in person will be your only chance to sell the deal. You can either inspire confidence or make them think you’re not someone they want to invest in. First off, don’t forget the basics, like a suit, smart shoes, and a well-groomed appearance. Next, be confident and positive, but don’t be arrogant or over-confident. Try to get across to the lender a clear and articulate summary of what you hope to do with the business. Don’t try and wing it and see how it goes on the day. Practice what you’re going to say and how you’re going to say it.


Fighting Over a Blown Budget? Try eBay Therapy

Arguments about the family budget; maybe they happen during the monthly or yearly budget committee meeting (you are having those aren’t you?); or maybe they happen at dinner just before bed.

Regardless of when they happen or where they occur, these disputes always seem to result in mudslinging worthy of a heated political bout. The accusations are inevitably a variation of the same theme: “the reason we’re short on money is because you blew our budget!”

Time to face it: you two are great together, but you both have terrible judgment. Okay, that’s an exaggeration, but you have to admit that on at least one occasion (seriously, just once?), you have each made a poor purchase.

So in an effort to find a compromise, it’s time to recognize each of your lapses in judgment, and maybe even make back some of the money you spent with eBay Therapy. It sounds crazy, definitely simplistic, but it works quite well.

When the discussion starts to get tense, and the “you blew our budget” comments are about to fly, it’s time to do the following:

1. Stop the argument immediately. No, you’re not going to avoid the discussion, just put it on hold until you can find a compromise. The idea is to start the discussion again only when both of you are ready to face facts: a poor purchase is human, and you both have made at least one.

2. Find your Token. Each of you go find an item that represents one of the worst, most ridiculous purchases (between $50-$100) that you made last year. Make it count, find something you really regret purchasing and have gotten little use from.

3. Open your eBay account. List the tokens: auction style, aggressively priced to sell.

4. Sell the tokens. Add the money back into the budget. Now that you are wondering what’s so fantastic about such a simple idea, let’s analyze what occurs.

Cool Down – First, by moving from argument to token-hunting, you lighten up a heated moment and put a little fun into an otherwise stressful situation. Focusing on this new task gives you both a chance to cool down and avoid saying something you will regret.

Compromise – In addition, you are forming a compromise by admitting that you both have made at least one poor purchasing decision over the last year. According to Jay Slupesky, licensed marriage and family therapist: “sometimes the best solution to a disagreement between partners is to agree on a compromise.”

Each person gives a little on their position and the couple “meets in the middle.” Your tokens provide concrete evidence to the compromise. You each give a little on your position and now that you are on common ground, the discussion can resume on equal footing.

Focus – You limit the scope of the conflict to the point of contention. Unfortunately, financial arguments rarely stay confined to finances.

Mudslinging from other areas of life tends to be brought into play when financial arguments get heated. With eBay Therapy, you focus on the conflict: whether one or both of you blew the budget. Staying focused doesn’t help you prove your side of the argument, but it confines the argument to one topic: finances, and finances alone keep the mothers-in-law out of it.

Liquidate – Look past the argument that got you here and you’ll see another benefit of eBay Therapy: you both made purchases over the years that have real value…to other people! It’s time to start making some spare change off of the trifles that idly sit throughout your home.

So, will eBay Therapy solve all of your problems? Of course not…if you and your spouse are in dire circumstances, it’s time to seek out professionals that will help guide you. But it will help diffuse minor budget arguments.

Nor will eBay Therapy provide cover from an egregious budget violation, such as a new 60-inch LED TV, you’re on your own with that one. But by cooling the situation, compromising with your spouse, and focusing on a common goal, your participation in eBay Therapy is a good step towards a healthy budget and a healthy partnership with your spouse.

This is a guest post by staff writer at PT Money: Personal Finance. Check out the blog to discover more ways to save money, make extra money, and spend money wisely. See the latest review of the best credit card for college.


How Your Parents Money Choices Influence Your Finances

How did your parents manage their money? If you are not sure, chances are good that your parents did not have a strong impact on the way you are living and spending (or saving) money today. However, you may not realize that what your parents did with money really did impact your own lifestyle choices. Take a look at a few scenarios and how they could have impacted your financial future.

Your Parents Did Well Budgeting and Managing

Some parents, especially older parents, managed money very tightly. Credit was not something that they wanted and not being able to buy a home with cash was a sure way to show the world that you did not have the means to manage your money. Money was not wasted on toys, eating out or other things people do today. If your parents taught you to manage money like this, you are likely a saver and satisfied with minimal purchases and needs.

Your Parents Struggled Financially

In some situations, the outcome may be directly the same or different from your parents. For example, if your parents struggled and you had very few toys and new things, you may have resented your family’s struggle so much so that you now spoil yourself with the purchases you make. You may be spending money now, and using credit heavily, to fill in that void.

On the other hand, some children knew that their parents were struggling and thus they did not want to see themselves in that same situation, especially with their own children. This leads to the more frugal minded person who wants to spend less so that he can have more in the long run and never be in a financially bad situation like his parents.

Your Parents Spent Money

On the flip side is the parents that liked to spend. If your parents spent money easily and you received the things you wanted, you may have the same lifestyle now. You may be using credit cards quite heavily, even if you did not know that your parents borrowed money to manage their finances. You want to live and give the same style of life (having what you want) to your children.

Budget Families Are The Best

The smallest percentage of families is those that taught their children the value of a dollar. These people worked very hard to earn what they had and made sure their children knew it. They worked out a budget each month and the kids knew there was nothing extra. You may have been given an allowance as a way to teach you how to manage money, or encouraged to get a job at a young age.

The way your parents managed money is almost always a direct reflection on the way you manage your money. You can break the mold though. To do so, you need to make your own decisions on how to manage money properly, and pass on the right methods to your own children as well.


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