Financial Literacy Series - Topic 3: 5 Factors to Consider When Looking at Funding Sources

When choosing a funding source, you have to match your needs with those of the funding agencies. Every agency, even different divisions of the same agency, has very specific needs that they are looking for. If you do not meet those specifications, then you will be rejected. They will all be assessing the amount of risk your business proposal represents to them. There are some very basic criteria that they will use to see if they want to spend time looking at your proposal. These are usually outlined on their website. They are:

1. Size 

Make sure that the level of funding you are looking for fits within the parameters that the funding agency is looking for. This can be both too large or tool small for the agency you are considering.

2. Nature of the funding you are looking for.

Look at the funding source’s requirements/eligibility and check to see if you and your needs fit those criteria. For instance, if you are looking for short term funding, this will not fit the criteria of what a venture capitalist is looking for. If certain agencies are providing funding to those looking to expand to another market outside of its home market, and if you are a start-up, you might not qualify for the funding. So, the stage in your business life cycle matter too. It is said that most start-ups will fail within the first two years. Banks usually prefer to avoid start-ups, as they don’t like the risk associated and prefer to wait until they have survived two years. There are funders (such as private investors) who will take this risk after doing due diligence.

3. Location

Some locations are perceived as higher risk than others. The problem is that this perception can change over time. Some funding agencies are restricted as to the areas they are willing to look at, whilst others are restricted by mandate. Once again, check on the website of the funding source you have selected.

4. Industry

Different agencies have particular preferences as to the types of industry that they will consider. For instance, some funding agencies will not consider franchises whilst others specialise in them. Some will not look at technology companies, but others specialise in them. If you are a member of an industry association, they can usually point you in the direction of funding agencies that assist their members.

5. Commitment

One thing is certain. All funding sources will be looking for some indication of your commitment to the business. For some this will be cash or personal security for others they may consider sweat equity to be part of this process.

When you consider and apply these factors to your proposal you will have a better chance at success.

If you need help securing your funding, reach out and we can help.