There will come a time as a business owner when you’ll need funding to help your business grow – this is especially true for businesses that need a boost to get them off the ground. There is a range of options that can help you with this, from traditional loans or alternative funding. Grants, angel investments and crowdfunding are all options to explore if you need finance for your business to be successful. Applying for finance means you will need a business plan in place to show lenders and investors how you plan to use their funding – we will look at why this is important and what to include in your plan below.
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What is Alternative Funding?
Alternative funding refers to the various other ways you can finance your company as an alternative to traditional bank loans. You may decide to apply for alternative funding if you have been turned down for traditional finance options in the past, especially if you have poor credit, or you simply don’t want to start your company by landing yourself in debt.
There is a wide range of alternative funding that you can choose from. Doing your research to decide which would suit you best is beneficial. Best funding sources for small business will also assist you with additional information. Here are some of the alternative options you could choose from to boost your business:
These tend to be awarded to applicants that fit the requirements that a local government or council are looking for. They can be difficult to obtain as specific circumstances are needed to be awarded a grant, but if your business fits the bill, you could take advantage of a valuable boost.
This is a good way to test your target market and can help to launch a product or business. Anyone that may be interested in your business can add some cash to get you to where you need to be, but with so many crowdfunding sites online, it is worth reading the small print.
These are individuals or firms that are willing to give funds to start-up companies to make a return from the profits made. They usually choose businesses that are primed for growth.You can find angel investors by using platforms online to pitch ideas.
This is a type of lending that allows individual people to borrow and lend money from each other. You can get this started by connecting with like-minded people and investors and is great for businesses looking to invest.
Why is a business Plan important?
Applying for any type of loan means you may be asked for a business plan so that lenders can see how you intend to use the funds. It is even more important when applying for alternative funding because they are more difficult to be approved for.
As mentioned above, funds like grants are specifically awarded to businesses that meet certain criteria, so if you find funding that you think would be suited to you, you should adapt your business plan to show the lenders this.
Angel investors and peer-to-peer lenders need an idea of how successful your business is going to be, so creating an in-depth plan shows them how you intend on growing your business, and how likely they are to make a return. Below, we’ll look at a few of the most important features to include in your business plan.
You will need to give an overview of your company. You should start with who you are and what is it that you do within your industry. This allows you to explain what made you start your business, and why you’re different to others.
It also allows you to explain why you would be a good investment. You should also include a bit about the structure of your company, your mission in the short and long term, as well as any information about your team.
This refers to the strengths, weaknesses, opportunities, and threats that may impact your company. This gives lenders a good overall view of how you operate, what you think is good about your company, if there are any difficulties that you are facing and if you think there is anything that may stop you from succeeding.
This allows lenders to determine whether you have an advantage in the market. This is crucial if you’re trying to gain funds from a specific grant, or angel investor.
This is a great way of showing your potential investors how you stand out from the crowd. Taking the time to look at how your competitors compare to what you’re offering means you can differentiate your product or services.
You should also think about segmentation – is there a way that you can focus on a niche market to become popular within a smaller audience leading to loyal customers? No matter what you are hoping to fund, there will always be a competitor, so you should explain in your plan how you are different from the rest.
One of the most important documents you’ll create for your company is a business plan. It is the venue where you introduce your company, yourself, and the strategy for its growth. You should do as much research and writing as you can if you want to use your business plan to raise capital.
Explain why you’re serious about your business and how you’re bringing something unique to the table that they’d be lucky to be a part of if you want potential investors to be as passionate about your venture as you are.