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How to Prepare for Government Grants to Start a Business
The fact is that the US government gives out billions in government grants to start a business each year. Sound like a lot of money? Well would you believe that the federal government gives away a total of $25 billion in domestic business aid, all together each year?
However; the truth of the matter, is that in spite of there being such a large available pool of money, competition is stiff. This of course means that the people who are the most prepared and knowledgeable, generally tend to walk away with the lions share.
The First Thing to Do
The very first thing that you need to do is to come up with a complete and comprehensive business plan. Not just a good plan but rather, an excellent plan. Consider using the Internet to conduct your market demand research.
Your plan should also demonstrate your complete familiarity with all the products involved in the business you are proposing. You should also be able to demonstrate a complete familiarity with employee wage scales for the type of labor performed in the course of your business.
The Second Thing to Do
The second thing you can do, is to begin to work on your presentation skills. You see, you have to understand that aside from all the paperwork you’ll have to submit, there will be personal interviews. People you will have to convince that your plan is viable.
The Third Thing to Do
The third thing that you will need to do is to familiarize yourself with the entire process of getting government grants to start a small business. This is no time to learn on the fly. There’s just too much at stake. Consider paying for the services of a consultant.
1) Before you start applying for grants, make sure that you have your business planned meticulously. Be prepared with an excellent business plan, with the exact amounts and figures that you require in every aspect of your business such as overhead, manpower, facilities and other expenses. Once you have the figures in place, add an extra 25-30% to this amount as a contingency measure to safeguard you against unexpected expenditure. A well-planned business plan could work wonders towards you obtaining a good grant to help you with your business.
2) Engage in the services of a consultant to help you find and obtain a small business grant. Although this may prove to be slightly costly to you, but the experience and knowledge that the consultant brings for your grant application could prove to be priceless, and may be the deciding factor in you obtaining it, or failing in your bid.
3) Use the internet and available website to good effect. Visit relevant sites such as the Catalog of Federal Domestic Assistance (CFDA) where you could find a list of small business grants that you could apply for, as well as the Small Business Administration (SBA) website where you would discover all the information required in regards to grant applications here. Other useful sites especially for women entrepreneurs include usagovernmentgrants.org, and of course grants.gov, a government-linked site where your grant-seeking activities could bear fruit.
4)Do not forget to work on your presentation skill as well, as you would be required to present in front of a grant-awarding committee. Thus be prepared to impress them with your proposal, and all the best in obtaining the small business grant for yourself!
How to Borrow Money, Part 2
Debt Financing
Debt financing means borrowing money that must be paid back over a period of time, usually with interest. It can be a short-term: less than a year and a long-term more that a year. You do not relinquish any ownership rights by taking a loan and limited by obligation of paying a loan back with interest. This is why loan for new businesses usually secured by one or more of the following: owners personal guarantee, real estate, company assets, etc.
The disadvantage comparing to the equity financing is that you must make scheduled payments regardless of your companys financial situation.
Debt sources can be divided into two groups: non-professional such us relatives, friends, and employees, etc. and professional such as banks, credit unions, etc.
Financial Institutions, by themselves, traditionally provide short term financing for small and mid size businesses: line of credit, equipment loan, etc. Long term loans in many cases guaranteed by the Small Business Administration loan program that helps leverage out risk for financial institutions.
There are some pros and cons in both Equity and Debt Financing. The best capital structure will depend on many different factors. For more sophisticated cases I suggest to hire a seasoned Financial Consultant.
Points the borrower usually evaluates before you giving the money:
1. How good is your credit history
2. Do you a solid collateral
3. Will you be able to repay the loan
4. Does your management team have enough management experience
Your personal financial situation while starting a business
It is always a good idea to build your personal credit history. In the beginning your business does not have any credit history and lender will use your personal data to evaluate a loan terms. Order you personal report to see where you stand and check it for any unexpected errors.
Work with your personal budget. You need to understand that usually you will not be able to take any cash from new business for a while. Make sure that you have enough money to start you business venture and enough money to pay you bills until business will become cash producing.
Put together projections and classify your future business expenses. Some of the expenses will be one-time costs such as the fee for incorporating your business; some will be ongoing such as inventory, insurance, etc.
There are two types of expenses: variable such as inventory, sales commission, etc. and fixed such as rent, utilities, etc. If you feel that you do not have enough expertise to do budgeting and forecasting it might be a good idea to hire a professional to do that.
Yury Iofe, MBA
Universal Business Structured Solution
More educational resources by Yury Iofe:
www.ubssolution.com