5 Steps to Funding Your Business
Brought to you by PNC Business Banking

Securing the funding your business needs is one of the most important roles of an entrepreneur. Knowing the key steps to take can get you closer to success.

Who should be the first investor in your business?
Your personal credit history won’t play a role in financing your business.
Which of these is NOT a good option for funding your business?
Getting feedback from consumers is too difficult and isn’t an important step in confirming that there is a need for your product or service.
In order to prove your business can be profitable, you’ll need to:

Right!

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Business Plan Challenge

Have a great idea? Start drafting your business plan so you can begin the funding process. Or if you already have a small business, revisit your existing business plan so you can seek additional funding if and when you need it.

Session Q & A

  • (1) Invest in yourself (2) Understand your loan options (3) Market research (4) Prove you can generate steady cash flow (5) Create and implement your business plan

  • Initially, you should invest as much of your personal resources into your business as possible. At the minimum, it ensures that you remain in control of the vision and direction of your idea as opposed to investors that will come onboard. Additionally, your business typically can’t borrow money unless you’ve shown your confidence in the project by personally investing at least 20 to 30 percent of your own funds. You need to use your money to attract more money. Not putting any skin in the game, will likely not encourage anyone else to.

  • When you receive bank statements, review for unauthorized purchases or erroneous bank fees and keep for up to twenty-four months. For the self-employed, this is particularly important. In some instances, the absence of a regular W-2 and paycheck stub means you’ll need to prove your income by using bank statements.

    Keep tax documents for at least seven years. It may seem like forever, but so will an IRS audit, if you don’t have your tax returns in order. If you think you’re due a larger refund, you have three years to file an amended return, and the IRS has three years to audit you, if they think you made a mistake. The IRS has six years to audit you when they think you underreported income, and there’s no time limit when they believe you blatantly filed a fraudulent return.

    If you’ve lost old tax returns and would feel better if you had a copy, contact your tax preparer, and if all else fails, request a copy of past tax returns from the IRS. You can get a tax return transcript for free in about two weeks by calling 1-800-829-1040.

  • Sales that don’t get tracked, don’t exist. And, customers with no contact and demographic information captured are imaginary. To be successful in your venture, you must start out tracking the numbers upfront so that you can prove to yourself that the business is viable and also make a strong case to potential investors down the road that your idea is worthy of the risk. Start out by tracking sales over different time periods. What are your annual, quarterly, monthly, weekly and daily sales? The next metric to assess is your sales by product or service, so you can quantify exactly what’s selling and get rid of what’s not. Last, consider revenue per sale. What is the actual net profit for each individual unit per sale? Also, get in the habit of capturing as much data on your customers as possible. Saying you serve women is not enough. How old is the average woman you serve? Is she married or single? Does she have children? Where does she like to eat, shop or volunteer? The more intel you gather on your customers, the more you can prove that you understand their needs and equip yourself with the products and services to meet their demand.

  • Creating a working business plan is often a vital first step when searching for financing options. More than just drafting up a document, you need to create a working plan that can you can revisit and reevaluate, so that it evolves to mirror the business you want to create. The business plan should contain a forecast for your business with at least two scenarios: (1) how you expect your business to perform if you don't get any financing, and (2) how it will perform if you do. There are a lot of resources you can turn to for help on the plan, such as small-business resource centers at local universities, your community, or asking for help from trusted professionals or other small business owners.

  • The Small Business Administration provides great templates for creating your working business plan. Check out www.sba.gov/writing-business-plan.

  • It's important to keep accurate and clear financial statements, bank statements and even tax returns! These types of documents are the things that can make or break potential business loans. It might make sense to engage an accountant or trusted financial advisor for help. Providing this type of documentation gives the potential financing entity a glimpse into your future cash flow to pay creditors, employees and, most importantly, them! If you plan on applying for funding within the next 24 months, you'll want to prove you can make the most money possible.

  • While bank loans and angel investors are viable options for financing a business, they're not the only options. Many different factors (such as what capital will be used for specifically, or, the current economic state of the industry) may allow you to qualify for additional resources, such as grants. Although grants are often seen as "free money," many of them come at a price. You might be required to match the funds of the grant, which you can hold as leverage with other investors. Additionally, you might be able to combine the funds with a business loan. There are different creative financing opportunities that you can look into to figure out what works best for you and your business.

  • Grant applications and approvals can take a few short weeks or several months depending on the grant available. Use sites like www.sba.gov and www.grants.gov to search for grants that might be a great fit for your business.

  • You know your idea is a good one, but the proof of concept lies in whether or not you can get people you don't know to test or purchase the product. Market research is key, because if you can't get buy-in from potential customers, then you may need to reevaluate your product or idea. The bottom line: if the product or idea doesn't make money, it's not going to encourage someone to help fund it.

Patrice C. Washington

Patrice C. Washington makes money educational yet fun with her Real Money Answers financial series. She is a featured columnist, television & radio commentator, transformational speaker and leading authority on personal finance, entrepreneurship and success for women and youth. Patrice’s wisdom on money matters has been featured as a recurring voice by national brands such as NBC, Black Enterprise, The Huffington Post and Upscale Magazine. She is the personal finance voice of the Steve Harvey Morning Radio Show and has shared the stage with him spreading her wisdom on a national tour.

Patrice C. Washington makes money educational yet fun with her Real Money Answers financial series. She is a featured columnist, television & radio commentator, transformational speaker and leading authority on personal finance, entrepreneurship and success for women and youth. Patrice’s wisdom on money matters has been featured as a recurring voice by national brands such as NBC, Black Enterprise, The Huffington Post and Upscale Magazine. She is the personal finance voice of the Steve Harvey Morning Radio Show and has shared the stage with him spreading her wisdom on a national tour.

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