External financing can be found in many forms and the internet is a useful tool to educate yourself on where to find financing for your business. Several websites including Women’s Enterprise Centre provide a good overview of various financing options. You might also watch Dragon’s Den to see the Dragons or investors, assess opportunities to become owners in businesses they believe have potential to do well.
Entrepreneurs can use financing to grow their business faster than if they relied on their own resources. Those who have used external financing often say knowing the financing was approved allowed them to do what needed to be done without worrying if they could pay the bills at the end of the day.
When you’re ready to shop for external financing for your business, don’t rush into the process without taking time to prepare well. These five simple steps are not necessarily easy but the time you invest to complete each step will prepare you to shop for external financing with confidence:
Step 1 – Write down the growth plan for your business including the reason you need money for your business. Before anyone is going to lend you money to invest in your business, they will want to understand your plan for growth to make sure they can get their money back.
Step 2 – Own your numbers. Knowing how the money is coming into your business and where it is being spent is a good starting point. Next, plan how you are going to bring in money in the future, and what the expenses will be. Lastly, go month by month into the future for two or three years, looking at when customers will pay you, and when you need to pay your suppliers and other expenses.
Step 3 – Look at how you do business. As you work through your numbers in Step 2, can you see ways of doing business differently to provide more cash in the business? For example, can you ask customers to pay in 30 days instead of 60 days, or even better, upon receipt of the invoice? Will your suppliers give you 60 days credit instead of 30?
Step 4 – Invest your personal funds and assets in the business before you ask others to invest. Investing in your business demonstrates to a lender that you believe in the future of your business, and they should too!
Step 5 – Be ready with collateral security. Without an asset to pledge as security for the loan, lenders must rely on your verbal promise to repay. If you can offer tangible security against the loan, you are reducing the risk the loan will not be repaid and therefore you can expect to pay less interest, and possibly qualify for more money.
Be prepared to speak to many different people in the process of shopping for money to grow your business. Listen carefully to the response of each one, and if necessary, tweak your growth plan to incorporate good ideas you learn along the way. Ideally you will receive more than one offer for financing to enable you to compare terms and conditions and select the offer that best meets your needs.
Guest Expert:
Melanie Rupp (MyBusinessAdvisor.ca) is a business advisor, coach and mentor to growth-oriented women entrepreneurs. She specializes in teaching women business owners how to read their financial statements like a story.
Women Entrepreneurs Community 
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