Often entrepreneurs will be in the process of building their businesses and suddenly be struck by a need for cash. The business wins a big contract or general growth has increased in speed. On the down side, the slower economy slows sales growth or customers slow down their payable cycle. Either way, this is not the time to go looking for capital.
If you ever believe you may need capital, the time to start the process is now, be it debt or equity. Take the time to get to know your banker. If you bank at a large bank, such as Bank of America, get to know the local branch manager. Find out how they process business loans. If there is a local loan officer, ask to meet with him or her. Find out what the lending standards are.
Large banks may allow the branch to approve loans up to a certain amount. Higher amounts may be kicked up to the regional or corporate offices. It would be a shame if you were denied a $60,000 loan by a corporate office, but you could have gotten a $50,000 loan approved by the local branch.
Finding a smaller local bank that focuses on commercial accounts will also improve you chance of getting a loan. You can get to know the lending officer personally and keep them informed of your business on a regular basis. If you are meeting your expected revenue milestones, your lending officer will be more likely to believe your plan in the future.
Equity capital is also a relationship business. If you think you may need some friends and family capital in the future, ask your potential candidates to sit on your advisory board. You get their advice and allow them to see you in action. Additionally, you get the experience of working with them, which may lead you to decide that you would not like them to be an owner in your business.
If you are interested in venture capital, make it a point to get to know some venture capitalists. Although reputed to be stand-offish, they are most afraid you are going to ask them for money. If you are just networking, many VCs will be thrilled to meet with you and give you advice and the benefit of their experience.
You can start with networking events put on through your local technology council (or similar state/city entrepreneurship group). You might try presenting at a venture forum. This gives you both practice and gets your name into the venture community. Volunteer to be a mentor in local entrepreneurship organizations. They often hold group meetings and you will get the chance to meet VCs on an equal footing.
Getting a bank loan can take four to eight weeks and raising venture capital can take six months to a year, sometimes more, so having your foot in the door can really help move the process forward. Don’t wait until you n