Before you speak to a debt financier or equity investor about securing capital, you should have gone through the process of pre-qualifying them to some extent to make sure they are relevant to your business financing requirements.
When you go to speak to a source of business capital, its their turn to qualify you and the sooner you allow this to take place, the faster you’ll get their serious attention.
Too often, business owners and managers start off their initial discussion with lenders or investors with a long winded explanation of their business opportunity or business potential, trying to impress the capital provider with what they view is the best approach to securing capital.
Instead of creating a good first impression, they are more likely to put the capital provider to sleep as the provider impatiently waits for the business owner to disclose the pertinent initial information they require to perform their initial assessment of the business financing opportunity.
Seeking business capital is a marketing exercise and like any marketing approach, the goal is to provide the target audience with the information they are interested, not the information you feel they should be interested in.
So here’s the best way to get off on the right foot with a debt or equity financier. This approach may also get you a fast No as your audience will be able to qualify you faster, but at least you won’t be wasting your time pitching a lost cause.
Start off by stating exactly how much capital you’re looking for, why its required, and how exactly it will be applied in your business. While this may seem obvious, its rarely the beginning point of business owner presenting to a lender or investor. The primary reason being that human nature seems to think that if a compelling enough business case can be created right off the bat, then the amount of funds requested and the application will be secondary in nature.
In reality, by not being able to immediately describe in financial terms what capital you seek and why, you’re more likely to leave the impression that you don’t have a buttoned down plan of action that has been summarized in financial detail, regardless of the raw potential of the proposed investment.
When you lead with a detailed summary of your financial requirements, you’re not only allowing the capital provider to see if you fit into their current criteria, but you’re demonstrating to them that you have gotten a well thought out plan of action that can be accurately described in terms of numbers.
This is a great way to get serious attention from a debt or equity provider who are inundated with dreamers and entrepreneurs either weak at or uninterested in the underlining financials and corresponding stewardship that goes hand in hand with gaining access to someone elses money.
Once you’ve established what you want and why, the lender or investor will be able to make their initial assessment and either give you a fast no that you would have gotten anyway, or start moving forward in their seats with a higher level of interest.
We will address the next phase of the your initial discussion in tomorrow’s post.