When your business is poised for growth, securing sufficient capital is key to fully realizing that potential. While seeking capital is often an exciting and necessary step in this process, business leaders must ask themselves the right questions to ensure they’re prepared.

Reflecting on key considerations—including the purpose of the funding and how capital would be allocated—can help you articulate a compelling case to potential investors and align your funding requests with long-term business goals. To that end, 20 Forbes Finance Council members share the essential factors you should consider before seeking capital for your business.

1. Be Mindful Of Your Personal Credit Score

Many banks are offering bank lines for existing clients or those that they want to do business with. Before applying, be mindful of your personal credit score and the available cash you have in your existing corporate account. Be smart in your application statement on how you will use the line of capital and how the credit will immeasurably help your business (and ultimately help the bank as well). – Richard GusmanoBusiness Credit Consultants (BCCUSA)

2. Consider Pursuing Debt Or Equity Financing

Before seeking capital, business leaders should consider: “Should we pursue debt or equity financing?” The key concern with debt is its lack of flexibility during downturns, which can strain finances. On the other hand, equity doesn’t require repayments during tough times, but it can mean higher long-term costs and the risk of partnering with investors whose goals may diverge from your own. – Shlomo HalberstamBottom Line Concepts LLC

3. Know Your Current Debt Capacity

Prior to seeking capital, leaders should ask, “What is my current debt capacity?” Debt capacity is the amount your business may be able to borrow based on existing lending market conditions. Leveraging real-time lending data to secure your best debt capital options gives businesses an edge to make strategic financial decisions. – Matthew BjonerudCerebro Capital

4. Find A Bank That’s Invested In Your Success

Business leaders should ask themselves: “How can I find a bank that’s invested in my success?” The right bank can pair you with a client team that understands your business model and goals. By doing so, businesses gain a trusted advisor committed to their growth and accomplishments, and who can offer personalized solutions that may include capital, loans or the right cash management approach. – Monique JohnsonBeneficial State Bank

5. Know How Much Control You’re Willing To Relinquish

Before seeking capital, a business owner really needs to know how much control they’re willing to give up prior to entering the negotiation stage. That way, the business owner is making a rational decision rather than an emotional one. – Jody GrundenSummit Virtual CFO by Anders

6. Understand What The Business Can Afford Without Jeopardizing Operations

Before seeking capital, leaders should “do the math” to understand what the business can afford without jeopardizing operations. Capital is a fundamental need for businesses. Leaders should be steadfast that new capital is needed to preserve and advance the enterprise, and that capital costs are worth the effort and risk to the business. – Gale Simons-PooleBHG Financial

7. Find Partners Aligned With Your Growth

When a business decides it’s time to raise capital, finding partners aligned with their growth goals is incredibly important. Investors must be in lockstep with how the company’s leadership envisions using the capital raised for sustainable growth—whether it’s product development, global expansion or hiring increases, for example—as they work together to excel forward. – Mike WhitmireFloQast

8. Identify Specific Value To Investors

In the complex journey of securing capital, business leaders must center their strategy around a pivotal question: “What specific value does my business offer to potential investors?” This is crucial as it shifts the focus from merely acquiring funds to demonstrating clear, strategic alignment with investor interests. Focus on your unique value, scalability and, of course, demonstrating clear ROI. – Peter GoldsteinExchange Listing LLC

9. Know Why An Investor Would Choose Your Business Over Others

Before seeking capital, business leaders should ask: “Why would an investor choose my business over others?” This critical reflection ensures clarity in presenting the business’s distinct advantages—be it through specialized expertise, a proven track record or a strong management team. Showcasing a scalable business model and strategic market positioning are pivotal in highlighting your business. – Chris Seveney7e investments

10. Determine If The Organization Can Scale With Your Business

Ask yourself: “Is the organization I’m working with capable of scaling with me?” Growing operations and capital needs become larger and larger as they gain market share. If your lender can’t go the distance, you’ll find yourself searching for a new relationship later. Working with the same lender gives you a faster funding process and flexibility since they already know your business. – Joe CamberatoNational Business Capital

11. Identify Whether You Can Self-Fund

Here are a few questions business leaders should ask themselves before seeking capital to fund their business. Can I fund this round of capital on my own? Do I really need this capital? What will I have to give up in equity and interest rate expense to acquire this capital? Is this capital really worth what I must pay to acquire it? What is the chance of success after I deploy this capital? – Ford StokesActive Wealth Management, Inc.

12. Establish A Clear Vision Of Your Motivation

Before seeking capital, business leaders should have a clear vision of their motivation to do so. Pursuing capital to secure more working capital, as compared to doing so to purchase fixed assets, will require different preparation in terms of presentation, due diligence and underwriting. – Brian NiksaCapstone Financial Advisors, Inc.

13. Understand How Funding Will Accelerate Growth

Before they seek capital it’s important for business leaders to ask: “How will this funding accelerate our growth?” Having clear objectives and goals in mind will help ensure the effective use of capital for the business. – Frankie DiAntonioLexington Capital Holdings

14. Have Clear, Specific Goals In Mind

Before seeking capital, business leaders should ask, “What specific goals do I aim to achieve with this funding?” This question ensures clarity and alignment of the investment with strategic objectives, optimizing the use of resources. – Nathan GauvinBlackridge Investment Management

15. Know Your Competitive Advantages And Value Propositions

Ask yourself: “What particular competitive advantages or special value propositions does my company offer that will draw investors and set us apart from others in the market?” To have a strong story to tell prospective investors, this question forces executives to assess their business plan, market positioning and growth potential rigorously. – Neil AndersTrusted Rate, Inc.

16. Ask How Employees Can Benefit From Seeking Capital

More often than not, the strength and advantage of fast-growing companies is their workforce. Leaders should ask, “How can employees benefit from seeking capital?” First, clarify any changes in the equity compensation plans, and then get your team excited. Ask them how they would spend the capital and where they think is most important to ensure the future of the company. They are the ones with the inside scoop. – Karim NuraniLinqto

Business leaders need a clear business plan that has strong fundamentals (competitive advantage, barriers to competition, solid management team, scalable business and in a growing sector) before seeking equity capital. In today’s market, equity is more challenging due to capital markets being more restrictive, and fundamentals are more critical than ever. – Paul DaneshradStarPoint Properties

18. Understand How Additional Funding Would Generate A Return On Investment

Before seeking capital, leaders should consider, “Have we clearly defined how additional funding will drive growth and generate return on investment?“ – Thomas HartmannFunded Unicorn GmbH

19. Assess The Scalability And Sustainability Of Your Business Model

One question business leaders should ask themselves before seeking capital is, “Is my business model scalable and can it generate sustainable profits?” Assessing the scalability and profitability of their operations is crucial, as it ensures that they can meet investor expectations for returns and grow effectively with the influx of capital. – Gianluca SidotiThe Wealth Company International FZCO

20. Be Confident In Your Request

“Are you willing to give me your home if you fail?” That was my lender’s question when I requested my initial $10 million. I immediately said “yes” without hesitation—not even a blink of a second. On that first and only call, we had a deal. He later told me that he only agreed to fund me because of my immediate and confident response. Ask yourself that question the next time you look to borrow money. – Mark KaneSunwise Capital

The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Forbes article HERE

Join Our Investor List

⃰ Required Field
Thank you for contacting us! We will be in touch with you shortly.
Something get wrong. Please try again later.

Please enter your email in order to download

Thanks for submitting the form.
You can download OZ Educational Brochure at this link.

Something get wrong. Please try again later.