How To Secure Business Financing After Declaring Bankruptcy

StrategyDriven Managing Your Finances Article |Business Financing|How To Secure Business Financing After Declaring BankruptcyPitching to banks and investors to get funding for a new business is always daunting, but it’s particularly scary if you’ve already had a failed business and declared bankruptcy in the past. You can be sure that investors will do their homework and they’ll know all about it, so there’s no point trying to hide it. A lot of people assume that having a failed business in the past means that nobody will touch you but that isn’t the case. In fact, a lot of the most successful business people in the world have had failed business and declared bankruptcy before they landed on an idea that took off. Investors understand this and they are willing to take a chance on people, even if things haven’t worked out in the past. However, it is more difficult to convince them that their money is in good hands.

There are a number of concerns that investors may have and you need to address them. Firstly, they will worry about why the first business failed and whether it was down to poor management. Secondly, they will want to know about outstanding debts. If your new business is very similar to the old one, creditors may be entitled to collect debts from it, which is a big problem for investors. If your new business looks quite similar to the old one, you also need to help them understand how things will be different this time and how you will avoid another failure. Addressing all of these issues can be tough, but it’s not impossible. Here’s how to secure investment for a new business after declaring bankruptcy.

Focus On Your Business Plan

Your business plan is more important than ever if you have already had failed business ventures in the past. Any lenders will want to know exactly how you plan to spend the money that they give you and what specific steps you will take to grow the business and return their investment to them. Banks will want a clear plan for exactly how you are going to repay any loans that they give you, so it’s vital that you can prove you have thought about every tiny detail of your new business. You can find some great templates for business plans online, which will help make sure you haven’t missed out anything important and keep everything well organized. When writing your business plan, you must be specific about the numbers because this is what lenders will be really interested in, considering your previous business failures. Although you are pitching the product, it’s vital that you demonstrate a clear understanding of the finances if you want to inspire confidence in investors.

Approach Private Investors First

Although some banks will still lend to you, private investors are more likely to take a chance on your new business, so you should focus on them first. They have more control over their money than a loan approval officer has over the bank’s money, so they can make that judgment call and decide to back your business even if it doesn’t seem like a good idea on paper. You will also find that if you can secure partial investment from a private party, this drastically increases your chances of being approved for a bank loan because you are not asking for as much.

Search For A Business Partner

Having a failed business and declaring bankruptcy in the past presents two major problems; the first is that you have a terrible credit rating, which means that banks and private investors are naturally cautious about lending to you and many people will reject you immediately when they run a credit check on you. The second problem is that people will assume that you lack business skills. You tried to start a business on your own and ended up bankrupt, so the evidence would suggest that you are not capable. There are, of course, other factors involved and you should explain these to potential investors, but it’s still likely that they will have concerns about your skills as a business person.

You can address both of these issues if you search for a business partner. If you are able to find a partner with good credit, you improve your situation immediately and with them listed as co-owner of the business, your chances of getting a loan shoot up. If your business partner has a good track record and a lot of experience, that works in your favor too. The investors are a lot more confident because it’s not just you that’s running the business, you have an experienced, successful partner to help you manage the workload, meaning you’re more likely to make it work.

However, you should be very careful when choosing a business partner to work with. Find somebody that is equally as passionate about the product but, most importantly, somebody that is on the same page in terms of the future direction of the business. When you start having fundamental disagreements about where your business is headed, you’re in big trouble. You need to think about what your relative strengths and weaknesses are too so you can choose a partner that compliments your skill set. If you’re a marketing whiz but you struggle to get to grips with the accounts, there’s no sense partnering with somebody that has spent their entire career working in marketing. Instead, you need a partner that knows the financial side of business inside out.

Put More Of Your Own Money In

This one might be tricky if you are already in a tough financial position but it really helps if you can invest more of your own money. If you are willing to back the business yourself, it shows that you are confident about it and that plays well with investors. If you’re not willing to risk that much of your own money, why should they risk theirs?

If you are struggling to raise any of your own money to put in, you should consider holding off for a while. It’s not a good idea to start a business when you are in a precarious financial position because, if it doesn’t work out, you’re in serious trouble. It might be best to spend a few years restoring your credit rating and building a healthy savings account. This will reduce the risk on your part and make it easier to secure financing.

Look For Alternative Financing Options

Banks and private investors are the most common ways to finance your business, but there are alternatives you should consider if you are struggling.

Crowdfunding, for example, is a very popular way of funding a new company these days and many successful businesses have started out this way. If you didn’t already know, crowdfunding works by asking lots of people to put a small amount into a business idea, usually with the promise of a finished product or access to exclusive content once the business is up and running. This allows you to pitch your business without any financial risk and people are more likely to back you because you’re only asking for a small amount. However, crowdfunding sites have become very popular and they’re incredibly competitive. If you stand any chance of getting the required amount, you must invest time and money in creating a high quality pitch with video demonstrations of your products. If you are going to try crowdfunding, manage your expectations and remember that your product could get lost amongst the thousands of others on crowdfunding sites.

Peer to peer lending is another alternative funding source that you might want to consider. These platforms connect investors with people that are in need of loans, and many of those investors are more willing to overlook poor credit ratings. Again, you are not guaranteed to get a loan this way but many struggling business owners find that it is a good place to find potential investors.

Depending on where you live, you might also be entitled to a small business grant or loan through a scheme of some kind. These grants are created by local authorities to encourage new businesses to open in the area. If you can get a grant, you won’t need to pay it back, which is a huge bonus for a new business that doesn’t have much money. Even if you do have to pay your loan back, the interest rate will be very reasonable and some may not charge any interest at all.

A lot of people give up after their business venture fails and they are forced to declare bankruptcy. They assume that nobody will ever finance them again and it’s too much of a risk to open a new business. But if you have a great business idea, you should take a chance on it because there are still ways to secure financing. As long as you learn from the mistakes that you made the first time around, you stand a good chance of making your new business work. Just follow these tips and you can get the financing you need.

Introduction to Business Proposals

The business proposal is your key to winning work in whatever competitive marketplace you operate in. Get it wrong, no matter how solid the business or your idea, and you are unlikely to find partners or customers to work with.

Startups and entrepreneurs have found many ways to the stars and business success. But, the huge majority of them rely on the humble business plan to sell their idea and attract investment and interest. Once the company is up and running, the business proposal is used to win contracts, work or gain sales with clients or partners.

Talking the Right Proposal Language

There are several types of proposals including solicited (formally and informally) and unsolicited when reaching out to a company you wish to work with. This guide shows you how to write a perfect proposal. But before writing one, you need to understand that the key to success is to align your offer with their needs and play by their rules.

That’s easy enough when you are replying to a request for proposals (RFP), which is how much of the tech, business, government, and military world works. An RFP should have plenty of detail to base your proposal on. If you are responding to an RPF, ensure your proposal meets their style and responds to the key parts of their schedule.

Copy and pasting an old proposal, even a successful one, into their template is both lazy and likely lead to inaccuracies. Ensure dates and figures are accurate, in the right format and currency, and that you answer their questions first. Then dive into how you will solve their problem or meet their needs. If you don’t understand a question or detail, don’t be afraid to ask.

For informal or on-spec unsolicited proposals, you will need to do some digging to find out how your businesses can best work together, or how your products meet the need of the target. Look for previously published examples of RFPs or projects they have worked on, research any white papers or project blogs they have published, demonstrating in your proposal that you understand their needs and how your business can add value.

Even an unsolicited proposal should broadly follow the style of a typical response to an RFP, and maintain a total level of professionalism and detail.

Produce a Perfect Proposal

Any proposal needs to be based on realism. Even if there is plenty of competition, don’t go promising the moon with unrealistic deadlines or ludicrously low costs. That will only damage your own business, likely kill any possible relationship while giving your company a negative reputation.

When writing your proposal, start with key highlights from costs, dates, quality assurance providers and deliverables. Then, add in the detail of how your solution or work will benefit them, and, without diving into marketing spiel, how it can impress over the competition.

Finally, where possible, check who will be reading the proposal. If they have a social media presence or have written articles, keynoted events, or just talked at local business forums, read about them and get into their mindset and attune the proposal to that audience. They might be straight-talkers, like a bit of history or talk endlessly about figures.

Within the document, avoid dense text. Answer each question or explain your proposal in distinct segments. Reinforce them in the cover letter and any other parts of the proposal, saving anything that sounds like marketing (“our business is passionate about…” for the executive summary.

Finally, check the proposal a few times, get other people to read it, especially if you are a small company, and take on-board any advice. If you are working on your first few proposals, ask local business support groups to check them out, or see if they can recommend a friendly professional.

Finally, ensure it is sent digitally and by post (most RFPs expect this), and don’t bounce up and down expecting an instant response. The target company may get many proposals and take some time to weigh them up.