- 1). Identify sources of capital. You can borrow from the bank, credit union, private investor, co-workers, the state, your civic organization, family and friends. Capital is everywhere.
- 2). Create a business plan with a presentation and communication plan. The two most important parts of a business model are management and the business model. The business model is represented by your financial model. Provide your audience with an income and cash flow model. Assumptions should be clear and easy to understand.
- 3). Determine the amount needed and why. Also be ready to discuss the length of time it will take to repay the amount borrowed.
- 4). Decide on what you can pay--the interest rate--for the use of funds. This is also a good time to determine your options. If you have good credit, then you might be able to secure a loan based solely on your past credit history. If you do not, you will need to provide additional sources of cash flow for repayment.
- 5). Provide additional sources of cash flow for repayment. In the banking world, this is called "cushions of protection." These assets, perhaps inventory or equipment, can be sold or liquidated. The assets' value cannot be tied to the value of the business. Stock, real estate and other securities are also acceptable.
- 6). Contact the person or organization with capital and request an interview or application for a loan. If with friends or family, be sure to sign a contract with the terms of your loan. See Resources for an example of a loan contract.
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