How to finance startups
August 25th, 2010 | 
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One of the biggest problems in creating a business, is the lack of money needed to implement it and run it during the first months of life.
What is recommended to start a new business or company, is using its own capital, that is, use the money we saved, we can get our liquidation and employees, we can make by selling some personal property, etc.
However, many times the capital they have is not enough to build our business, so we find it necessary to resort to external sources.
We next steps to get money from an external source of funding:
1. Make sure that you will need external financing
First we must ensure that the equity capital we have is not enough to mount our company, and we really need to have an external financing.
This requires that we make in advance a business plan, where we calculate how much I going to need as an investment to launch the company and operate it during the first life cycle of production, ie, during the period since begins its operations until the company gets money in amounts sufficient to continue operating normally.
2. Calculate how much are we going to borrow
Second, we must be clear as to how much amount the amount we borrow.
To do so, we must subtract the total project investment, the equity we have.
3. Find the bank or financial institution indicated
Third, we investigate the various financial deals available on the market, and choose the one that can give us the amount we need, with lower costs, and allow the greatest possible time to pay the debt.
We must also take into account the requirements applying to grant the loan, as well as factors such as the reputation of the bank or financial institution, your care or the speed with which we could lend the money.
4. To ensure that we will be able to repay the debt
Once you’ve chosen the bank or financial institution to which we are going to apply for a loan, we must ensure that we will be able to pay the debt in case of getting it.
To do this we must find out the cost of borrowing (interest rates) and other costs that may be included such as maintenance.
Then we make our budget for debt repayment, where we calculate what the amounts or fees that we pay monthly to repay the loan. This table can give us the same bank or financial institution.
And then, we must include such contributions to our projections made in the business plan and, thus, whether the company would generate revenue that would be in the ability to pay such amounts.
5. Call your bank or financial institution
Once we are in the ability to borrow, we must go to the bank or financial institution that we have previously chosen.
We will have to carry all the requirements asked of us, one of them, could be our business plan where through the projections, we can show why we need the loan, and whether we can afford it.
Additional notes
We have set an example for the banks as a source of funding for startups, however, we must note that it is very difficult for banks to lend money to new businesses, yet present a good business plan and support it well .
However, today there are entities or non-bank financial institutions specializing in small and medium enterprises that they might give us the money required.
The requirements might ask would be to have one year of experience in the type of business in which we will undertake, ie we have had previous experience in a same or similar business to which we create now.
Other requirements which may be ask guarantees assets, usually with a value equal to or greater than the amount requested in the loan.
The drawback with these entities is that the amount borrowed is usually not as high as that could give the banks, although usually more than enough to create a small business. Another disadvantage could be the high cost of the loan.
But on the other hand, the advantage is that many of these financial institutions provide assistance for business creation and management, usually at minimal cost.
If we are to start our own company, we find these non-bank financial institutions aimed at entrepreneurs and small and medium enterprises in our town, if you live in Peru, one of these financial institutions are Edpymes.
For other ways to finance the implementation of a company, we invite you to read the article: funding sources for the creation of a business.
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interesting, and so long as you don’t object I am planning to refer to it in a post I’m intending to create. I work with business owners in a small island in the Canaries and here we have our own issues. A few of the fundamental factors being that we live on an island and so resident experience, materials and goods all have to be imported. There are also a lots of bureacratic hurdles that business people must deal with. Despite this it’s a fantastic place to live and it’s a relatively small inconvenience. The web helps a lot… I’ll be back to visit http://www.tenerife-business.com soon!