Hearing “No!” Is Not Easy
Hearing “No!” is not very easy in a lot of situations. Especially when the situation is related to your small business in Canada trying to obtain funding.
The funding goal which you had and which you needed to move forward with your small business is now squashed.
Sure you can try again. But will the answer be no again?
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5 Reasons Why Your Small Business Didn’t Get Funding
#1: Wrong Source of Funding
One of the first reasons why a lot of small businesses end up failing when it comes to their search for funding is due to the fact that they are looking at the wrong sources to get funded by.
Depending on your business: sources of funding can include family, friends, business partners, private investors, personal credit, banks and your local/provincial government. But do you know when to go to each one? And when to avoid some?
Example:
If you are looking for funding in the amount of $50,000 to get your small business started and you opt to go to family members and friends to get the $50,000, it may be very difficult. It is a large amount to be asking of anybody. If you hear a no (or don’t obtain enough funding) this may discourage you from moving forward. A bank loan might get you there, but as long as you have good credit and possibly some assets. Knowing where to go first is very important to obtaining funding.
Remember that you don’t need to get all of your funding from one place.
#2: Asking For Too Much
Another reason why many businesses fail in their search for funding is due to the fact that they don’t know what they really need, and they ask for too much funding. Asking for too much can discourage investors as it becomes clear that you aren’t sure of specifics in your business. Asking for too much can also discourage investors who potentially have money to lend you, just not the full amount.
Example:
If you are looking for funding to purchase a new vehicle for your business and the price of similar vehicles for sale is lets say $27,000, you can ask the sources for that, a little more or a little less. Depending on how much you have to invest of your own money as well. But if you over ask, lets say “$50,000”, this may seem shady and many investors or funding sources may turn away.
Remember that the more of your own money you have to invest, the better you look to investors and all funding sources.
#3: Bad Credit or Business History
If you have a bad business history and a bad credit score it may become tougher to obtain funding. Many funding sources may turn you away. Consider working with business partners who have a better credit history and continue to work on your own to improve.
Be sure to get yourself a Business Credit Report so you know what you are dealing with before you search for funding.
#4: New Business
Many new businesses are also refused funding due to the fact that they don’t have any credit history or business history. Many investors may refuse funding in the early stages, but may opt to fund at a later time. Consider offering some sort of incentive or even equity to potential investors to get some funds.
#5: The Wrong Approach
The fifth reason why many small businesses fail at their funding search is due to the fact that they have the wrong approach. Remember, nobody needs to give you money. Your product or service may be the best and may seem like an obvious success story, but depending on your approach, investors or funding sources may turn away.
It is important to always be professional, prepared and polite. Be sure to know your numbers and be excited about your business and why you believe funding could help. Sell the investor.
By knowing these 5 main reasons why businesses fail at obtaining funding could put you ahead of the game for the next time (or the first time) that you try to get funded.
If we missed one, let us know!