Before many even think of failure or the difficulties of running a business, the problem of money comes first. The good news is, many of the barriers you may believe exist in securing capital no longer exist, here are five startup funding myths that many still believe.
People Won’t Lend to You Unless You Have a Solid Business Plan
While a business plan is generally beneficial for the future of your start-up, it’s no longer necessary when securing funding. Alternative lenders often only need proof that your business is viable. A steady revenue stream should be enough to convince many of them to give you the capital you need.
Ask for Little
Part of planning your small business’s future is planning the amount of capital you’ll need. This should cover everything, from manufacturing to paying employees before the revenue starts coming in. It’ll also need to account for when the company is still losing money.
Despite this calculated number, many still hesitate to ask for the full amount needed when approaching a lender. Often it’s because they think the lender’s not going to give that much money to a start-up. While that may be true in some cases, not asking for the full amount just hampers your company and may keep you from paying back the loan.
Start-ups Are Too Dangerous
Modern investors are far more cautious than they were before the recession, which is understandable. Fortunes were lost. However, people have recovered from that fear. Lending is back in full swing, with over $9 trillion in loans today. It’s gotten easier to securing funding from banks and investors as a start-up, and even if traditional capital sources fail you, online lenders are still an option.
Online Lenders are Untrustworthy
Whenever something new comes along, scammers are there for the ride. That’s what happened with the internet. When it was new, scammers were everywhere, from spam emails to fake online lenders who demanded upfront payments as “proof” that you could pay back your loans. While scammers still exist, online lending is safer than ever before for small businesses.
Online lenders now have access to software that makes it easier for you to apply for a loan safely, without having your information compromised. This isn’t to say that you shouldn’t practice basic safety or do your due diligence. It just means you shouldn’t cross them off the loan option list.
Perfect Credit is Mandatory
While you do need a good credit score, it doesn’t need to be perfect to secure funding for your startup. Lower credit scores can limit your loan options, but you’re in luck – lenders are everywhere. If you can present a strong business plan, proof of viability, or ideally both, you should have a good chance of securing the loan. Crowdfunding lenders, for example, are far more interested in the concept than your score. The same can be said of many venture capitalists.
Entrepreneurs are everywhere now because it’s easier than ever before to find funding options for your startup. That said, it doesn’t mean you can just walk into a bank with an idea and expect to walk out with bags of cash. Getting capital still comes down to having a great pitch and a proof of viability.
What startup funding myths have you discovered aren’t true?