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Financing your start-up - tranche your funding requests!

Guest post by: Joseph Lizio

Article Overview: One fatal mistake that nearly all new small businesses make when seeking capital is asking for too much up front. You must lower the risk by demonstrating your business and capital management skills. Find out how …

Financing your start-up - tranche your funding requests!

I recently read a forum post where two young entrepreneurs (still in college) were seeking over $1 million for their new start-up, small business. While their business may be a great idea with huge potential - they essentially priced themselves out of the market with their $1 million funding request. While this business may actually need the $1 million to get to profitability - I can almost guarantee that it does not need all of those funds right now - at startup. So, why seek them?

I know that it is easier on the business owners to go out and get one, all inclusive loan or investment - but from the other side (the lender's or investor's side) - it is just too much risk and will never get funded.

This business would be better off staging its request based on immediate need. Example, this business may only need $100,000 to get it through the end of the year. So, only ask for the $100,000. Then, as the business approaches the year's end, start seeking additional funding.

At this point, the business would have some type of track record - either sales and/or revenue or contracts in hand from solid customers - both of these (revenue or contracts) will open many more doors for this business - leading to more financing at better terms for the business. Or, the business could have at this point generated some financial assets like accounts receivables, purchase orders or even credit card receipts that it could use for collateral to secure additional funding - meaning better terms, better rates and much faster approvals.

I realize that it is much easier and lower risk from the business owner's perspective to get all the money need right now - plus, seeking capital is very time consuming taking away needed time in the business. But, from the other side - those with the money - it is just too risky - asking for more than you need immediately is the surest and quickest way of hear that dredged ‘NO".

If your small business needs financing, why set it up to fail as your goal is to move forward. Don't set yourself up for the impossible by asking for too much - first prove that you can manage your debt or equity capital.

Tranche your requests and I can guarantee that you will quit hearing "no" and start getting the "yes" you deserve.

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Article Tags: financing, funding, loan, small business, startup



Related Forum Posts
New Funding Source Now LIVE! - Preneuraholics.com is now live and accepting funding requests! Preneuraholics Unite was created for those that have not been able to secure funding through loans, venture capital, angels or grants. This is new concept using peer to peer GIVING. No more loans! This is all about entrepreneurs helping each other. It's time for change to the system of funding. Check it out below (signature) and pass it on! Please feel free to ask your questions or give comments here.
Suggestion for an Entrepreneur Looking for Funding - I am new to this forum but have been actively assisting my husband with his cash flow business for a number of months. One issue that I have seen that often occurs from those looking for funding is the lack of paper work that is needed when a funding request is presented. It is so vitally important for an Entrepreneur to have their paper work up to date (business plans, executive summary) before they look for funding. In addition, it is so vitally important to keep in touch with the funding source to expediate their funding project.
Do you really need funding? - Hello jayapratap - it's very difficult to get funding for a startup company in India - but your company is service based which means you don't need as much capital to get going - can you not bootstrap your way to a few clients and some $ before going for financing? It's a lot easier to get investors when you have paying clients.
Getting Funding - I may have mentioned this previously, but one item that I have seen not to be included when asking for any type of funding is listing assets. Often times, an individual will ask for a type of funding and will neglect to list any assets/collateral that they have to complete the funding process.
Re: Use of Merchant Cash Advances on the Rise - This is a product I have access of selling but not my main focus and I have gotten requests for it without marketing. Access to capital for small businesses is tough and even with this product having high rates they still need it. I get the requests from mostly restaurants.


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