5 Mistakes to Avoid When Searching for Investment Capital
Look for investment capital – You could at any time have an incredible idea to create a china business or a revolutionary new product in the field of technology or commerce. But without capital, it would surely be just another idea. The cool thing is that everything can be solved if you have access to a large bundle of money saved for years as a reserve for the days of the storm.
Who has a business idea has two options: you can try to start the business with equity or start and expand the growth with investor capital. In the market there are angel investors and venture capitalists and many other sources of alternative capital for those seeking cash credit to capitalize on a business or company.
Tips for Finding Investment Capital
I am a big fan of people who create their startups using only their own resources, and it can be a viable option if you are extremely cautious when it comes to expenses if you have a little money seed and if your business concept will generate flow box immediately.
If you are not a bootstrap and are looking for investment capital then it is good to make some financial adjustments and you will definitely need financing and working capital. This support may come from a source or from various sources. While every business financing option has pros and cons, there are certain mistakes that you need to understand to avoid when looking for your startup capital. See below the five related errors.
1. Underestimate how much money you need for the business
Many entrepreneurs believe they will have a lower cost and more chances of securing financing if they ask the lender for a smaller amount of money, but this approach will not be good, it has two problems. First, most investors will see that you have underestimated how much it would take to make the business successful, and get away from it.
Even if you get secured financing, you will end up running out of money when you ask for less money than you really need. When you know how much money you will need to start your business, you are more likely to receive the capital to leverage your idea.
Most startups fail at this, so when looking for investment capital, you need to do everything possible to know exactly the right amount, and a little more to take a breath and survive.
2. Undo equity to start business
Investors often want an attractive share in exchange for their initial money, but giving up a very large percentage of the company at the outset can be disastrous.
In an ideal world, you would not even need to look for investment capital, you would have enough money for the first round of investments to become profitable, eliminating the need to raise more money again. Unfortunately, startups and fintechs face many challenges, obstacles and unforeseen events throughout the journey, unfortunately it is not possible to predict the future and have the best results possible.
That’s why it’s important not to overdo business participation, no entrepreneur starts this strenuous day with the goal of being a minority owner in his own company.
Many start-up founders of companies use their personal credit cards to finance their business, which is one of the most expensive financing options if you have a minimum of credit in the square.
Studies show that startup companies that rely heavily on credit card financing will typically fail. Leveraging debts using personal credit card puts the borrower in a very bad position, especially if the deal does not work out.
If you need to close the deal, you still will have a mountain of debt on your shoulders that must be returned to creditors on the card. If you delay payments, your credit score will be destroyed, your history stained and all your personal finances will be adversely impacted.
Note: ” Every entrepreneur thinks his idea is a winner because of optimism and confidence, but do not let it intoxicate your judgment, especially when it can potentially ruin your personal finances .”
4. Make advance loans with no consultation
With so many individuals seeking funding to start a business, it should not be surprising that there are criminals trying to take advantage of these business wishes. In advance rate loan scams is guaranteed that the financing or working capital no matter how bad the credit history, CNPJ with restriction in the SPC and Serasa, is released.
They ask for an initial fee – often saying it is to process the credit – and once you pay the fee, the loan will never happen. If you find one of these down payment rate scams, you can report it to the appropriate agencies.
5. Do not have a detailed cash flow analysis
Anyone who is about to release a loan for you or your business, whether it is a credit company or traditional financial institution, will want to know if you have full control over the cash flow and more importantly, how you plan to spend that money.
When looking for investment capital , developing a cash flow analysis will show potential investors that you have firm control from the operational to the administrative side of the business.
Also, a cash flow analysis is very difficult to fake, and this lets you know how good your great idea might be for what you want to invest.