subject: Five Things You Should Do Now - Preparing for the Economic Turnaround: Principles for Financing Growth [print this page] Many economic forecasters are now calling for a turnaround towards the end of this year or the beginning of 2010. Taking this into account now is the time to be preparing your financial structure to respond to future growth. Here are some suggestions on what to take into account as you plan for this: 1. Write a world-class business plan. Your business plan's quality and credibility has a huge impact on the quantity and quality of the financing you get. In order to get the most money and the best possible deal, create a business plan that lenders can't resist. A well-documented business plan contains narrative description as well as hard numbers. The key is making sure that one supports the other. Don't make the mistake of thinking a two-page summary will capture the attention of lenders. Most financial institutions won't even look at that kind of plan because they know it has no substance. It takes more than a few pages to provide the raw data to support your projections and conclusions. Without that data, your plan has no credibility whatsoever. 2. Match your financing needs with the correct financing product.
When most entrepreneurs think about financing, they immediately go to bankers or venture capitalists. But in today's capital markets, those represent only two in a wide variety of lending alternatives. To sustain your company's growth, get the right financing product(s) for your specific capital needs.
In order to pick the financing products that meet your capital needs: Do the research. Take the time to learn about the many different types of financing available in today's capital markets. Identify the type of lender that fits your industry, your type of company and your financing needs, and focus your efforts in that area. Get crystal clear about your financing needs. Talk with your financial advisors, your accounting firm, your attorney and anyone else who plays a key role in planning the growth of your business. Make sure you know the exact framework of your financing needs before approaching the capital markets. Get professional help. Raising growth capital could be the most important decision you ever make in your company. The money spent to hire an experienced professional who can help craft your business plan and find the right type of financing will pay for itself many times over. 3. Minimize risk Entrepreneurs often think they have to bet the farm in order to obtain financing. On the contrary financing your growth should involve less risk, not more. To minimize risk: Look for lenders willing to structure flexible agreements. Avoid agreements filled with restrictive covenants and warrants. Build in a cushion in case things go wrong. Never give away opportunities to protect yourself. 4. Conduct a very broad search of lending institutions. When looking for growth capital, don't limit your search to a handful of institutions. Doing so takes too long, limits your options and fails to build competition for your business. In particular, look for lenders who specialize in your industry, size and type of company. 4. Never give up control. Many financing transactions require you to give up some equity in exchange for the money. Some equity is okay but if you have to give up control to grow your company, don't do the deal. Finding the right kind and structure of financing is not easy and can be a tremendous amount of work when done right. However, it will certainly pay off in the long run and position you and your company to take advantage of the inevitable economic turnaround that awaits us in the future.
Five Things You Should Do Now - Preparing for the Economic Turnaround: Principles for Financing Growth
