As a business owner trying to grow your venture, you’ll know that funding is a key component to expanding a business. There are many fundraising methods, from crowdfunding to angel investors, bank loans, venture capital, government assistance grants and more. These funding options often involve many steps in the application process which can be daunting for new business owners. For Latina and minority business owners, securing funding can be especially challenging.
According to recent data, Latino and Black founders receive only 2% of the total distributed funding. Additionally, founders of color are 30% more likely to experience a lack of capital and relevant networks. The stats are similar for female-founded companies.
Often, many are at a disadvantage due to systemic barriers, lack of resources, and general misinformation about the processes involved in securing funding. Below are 4 steps to getting started in this process and resources to help.
4 Steps to raise funding for your business
1. Have a detailed business plan. Your business plan is your roadmap and it will help you steer your business as you start and grow. A well-thought-out business plan helps you to think objectively about the key elements of your business and informs your decision making as you move forward. It is also essential when you are seeking funding as it is one of the key tools you will use to persuade investors to invest in your business. Your business plan should outline key objectives and a clear idea of what your business does and how investor funding will be used.
To get started on perfecting your business plan, check out this free course and additional resources from the Small Business Administration (SBA).
2. Determine which investors are right for your business. Like we said, there are so many different avenues for funding, and not all will be the right fit for your business. As business owners, researching and narrowing down which funding option works best for you will help you in the long run. Venture capitalists and angel investors, for instance, are often looking for scalable startups. As defined in an article by The Founder Institute, “Scalable businesses maintain or improve profit margins as sales volume increases. Translation: They don’t have to drastically increase spending to accommodate increased sales.” If your business does not fit this model, perhaps a different form of funding would be a better fit.
Once you identify which funding option is right for your business, you will have a better idea of the areas to focus on for the application process.
3. Strengthen your pitch and presentation. Your business pitch is one of your most important tools of persuasion when it comes to acquiring funds for your business. Your pitch should be clear and concise while delivering the key components of your business venture such as what problem your startup aims to solve and detailed information about your business model. Together with your business plan these are two of your biggest tools in the fundraising process as they will help entice and persuade potential investors in taking a chance on your business. To perfect your pitch, practice, practice, practice! Seek out mentors and other business owners in your network to give feedback on your pitch presentation as you continue to refine it.
Here is a free resources by the SBA to get you started on perfecting your pitch.
4. Improve your current financial credibility. Latinas and other minority groups often face disadvantages when it comes to securing funding and acquiring loans. Many have faced financial hardships due to systemic oppression which can impact a business’ ability to secure loans and other funding. Taking steps to improve your credit score and protect your finances can help you in the long run when applying for business loans, grants, and other funding.
Minority business owners and entrepreneurs, especially Latinas, have great potential to grow and thrive with the right backing. Latinos are starting businesses at a faster rate than the national average across several industries, growing 34 percent over the last 10 years compared to just 1 percent for all other small businesses. Additionally Forbes reported that 40% of new businesses were started by women and 47% of those businesses were started by minority women.
These numbers show that women and minority business owners are eager to start and grow new ventures, and with the right funds and financial backing by investors they have the potential to expand to new heights.
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