Business

Young: Where to seek out financing for an entrepreneurial dream

Over the past 30 years, we have  witnessed a tremendous resurgence of entrepreneurial activity around the world.

One indication of that was the launching of the inaugural National Entrepreneurship Week in the U.S., which in turn spawned the initiation of Global Entrepreneurship Week, held during the third week of November for the past three years.

Global Entrepreneurship Week engaged more than 65 nations of the world that have embraced the notion that entrepreneurs may be described as aggressive catalysts for change in the world of business ventures, individuals who recognize opportunities where others see chaos, contradiction or even confusion.

Many of these global economies have been revitalized because of the efforts of entrepreneurs, and I for one am happy to report how the world has increasingly turned to free enterprise as a model for economic development.

Recently, I wrote in this column about the entrepreneurial idea and how the search and investigation of it may begin a personal transformation of the entrepreneur behind it.

Of course, transforming the idea into an opportunity becomes a critical element in the entrepreneurial process itself, but it’s not the singular element of success.

This week, as the calendar brings us well into 2012, I want to offer you my thoughts about what   the world of entrepreneurial pursuit presents to our society.

Wouldn’t you love to have a bag of dollars fall into your lap to launch your first entrepreneurial venture? Me too. With a great analyzed idea and a phenomenal business plan, you can convince yourself to feel entitled to receive the funding you’re  requiring to move to the next step.

But then reality sets in. For most entrepreneurs, first comes proving a new venture concept will work before first before anyone will put up the bundle of cash you  need to join the ranks of the rich and famous.

For years, I have heard the treatise that poor management is most frequently the reason businesses fail. If that’s so, let me be clear—inadequate or ill-timed financing is a close second.

Hence, when exploring your funding options, there are a few factors to think about:

• Are your needs short or long-term? How quickly will you be able to repay a loan or return on someone’s investment in your idea?

• Is the money you seek for operating or capital expenditures that may become assets, such as equipment or real estate?

• Do you need the money now or in smaller portions over a defined time period?

• Are you willing to assume all the risk if your company doesn’t succeed and do you understand related implications, or do you want someone to share the risk with you?

Providing yourself answers to these questions will help you prioritize your funding options.

There are two types of financing available for your entrepreneurial idea/venture launch.

One is debt financing where you borrow money and agree to pay it back in a predetermined time-frame at a set interest rate. You owe the money whether your venture succeeds or not.

The other is equity financing where you sell partial ownership in your venture in exchange for cash. The investor assumes all or most of the risk, so if the venture idea fails, they lose their money.

But, if your venture succeeds, then the investors typically make much greater return on their investment than prevailing interest rates.

But those aren’t the only options that should be considered. Others include:

• friends and family

• credit cards

• bank loans

• leasing

• angel investors

• private lending

The key preparation step in all this is to put together a great business plan, talk to a financial adviser or  entrepreneurial coach, and just start asking for financial support.

Someone will eventually say, “ Yes.”

Joel Young is the founder of the Okanagan Valley Entrepreneurs Society.

eagleyoung@shaw.ca

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