[Club100] Funding Your Business Idea: How to Get Started, Part 1 by @dhanishree

Karan: The last business idea I tried to implement did not work out the way I had hoped, but I am hopeful that I can try again in the future.

Arjun: It was certainly something, but what was it again?

Karan: A dog's beard oil that is both effective and safe to use. I gave it the name "Beardo" because I believe it is a venture that has a 100% chance of succeeding. However, authorities at the Food and Drug Administration were of the opinion that the product was unsanitary and cruel and that there was no market for it.

[Short Pause]

Karan: However, I have a new idea that I am confident is sure to succeed.

Arjun: Okay, let us hear your idea.

Karan: A coffee made from the roots of the plant. The coffee shop will be called Root Coffee House. The whole thing is in the beginning stages. I am looking for one person who would be willing to chip in $200,000 to help me get off to the right start.

Arjun: How are you going to track down this person? Where are you going to find them?

Karan: There is no need to worry about anything because everything will be fine. Everything will go smoothly and they will appear on time.

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The cash flow you need to run your business can be helped by a business loan, no matter what the purpose. It can be used to purchase inventory, hire staff, retool your marketing strategies, or whatever else you may need. As far as the process goes, it is pretty simple to describe.

The typical way to borrow money would be to borrow a lump sum of money upfront and then repay the money slowly over time. Such loans are often provided by government agencies. Often, finance companies offer loans at low-interest rates, require small down payments, and offer long-term repayment terms. These are excellent conditions for cash-strapped entrepreneurs.

Despite the fact that these government loan programs are available to almost everyone, not everyone can qualify for them. You will probably have to show that you and your company have been in business for some time and that you have a history of producing consistent revenue you can prove with documentation.

[Karan & Arjun] Being a new company, does that not suggest it is something that has not existed previously?

There is a kind of catch to this, you know. For a company to get funding, it must be profitable, but startups require funding if they are going to become profitable. In the case that you are only in the process of starting a new company, a conventional term loan might be more appropriate. The interest rates on these loans are typically higher than those offered by government-backed programs, and the period you have for paying off your loan is also shorter, but you can still qualify for one.

In case that doesn't work out for you, you might be able to unlock immediate financing by securing a business credit card, but it will require you to use your personal credit to be approved.

It is important to make sure that the lender you are applying with, regardless of whether it is a business loan or a line of credit, feels confident that you will not run off with their money. The reason why you have good credit is that it basically tells the lending institutions that you will be able to repay the loan when the time comes.

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It is even possible that, however, some lenders will require you to submit collateral in the form of a house or a car as a last resort, to ensure that you are able to repay the loan.