One of the worst things that can happen to anyone when running a business during the ongoing COVID-19 pandemic, is to end up in cash crisis. To avoid this it's critical to obtain enough funding at the very beginning.
Below are the key steps for how to start a small business and finance it successfully during the pandemic.
1. Develop a Solid Business Plan
Begin your search for financing by presenting your business idea to prospective lenders or investors. A business plan is usually required reading for anyone considering handing you cash or credit to get your small business started.
2. Understand Some Key Financial Factors
Once you've developed your business plan, you must be completely aware of the resources that exist for financing a new small business.
a). Equity Versus Debt — Business financing comes from either equity or debt. Debt financing refers to a loan — money from a bank, digital lender or other source, where you have a definite timetable for repayment. Equity financing from investors involves sharing the ownership of your small business. The investor receives a cut from future earnings.
b). Control — Many small business owners need to give up some control when financing a small business. Think about how much power you will agree to surrender in order to obtain financing.
c). Security — How will the investor or lender acquire the capital? If you fail to pay, who will they go after in a settlement?
3. Determine Where You'll Obtain Your Financing
a). Digital Lenders — This may be the most obvious source of small business financing owing to their simplicity, ease of loan accessibility among others lenders. Lenders like OKash, CreditHela, OPesa, M-Shwari require no paperwork and a loan is processed in minutes.
b). Banks/Individuals — Despite today's crushing economy, there are multiple banks and people still willing to invest in startups. If you choose this route, you will be giving up some control especially with individuals so be sure you know how much control before you sign anything.
c). Friends and Relatives — Although this can create tension in a relationship, the more professional and detailed you are with the arrangements, the less everyone will suffer from the stress that may occur in these situations.
d). Small Business Loans From County & National Governments — These are limited, low-interest loans for business startups or expansion plans. Many of these loans come at discounted rates for small businesses that will create jobs or help them reach certain development goals.
In conclusion, no matter where you search, a potential lender is going to evaluate your creditworthiness. As an entrepreneur, you may be determined to get your new small business up and running as soon as possible.
Maintaining that determination, while taking these important steps, should enable you to find the right mix of financing options for your new small business during this era of economic meltdown.