Using Crowd funding by asking questions

Caution Danger Ahead

You have got a great business idea but the bank does not believe you will do good. Borrowing from friends and family used to be an option, but not anymore. Getting funds from a large number of investors does not make the money a cheap source. There are basic questions to be answered. If you answer them correctly  your company will rock. Following are the questions and tips to answers:

  • How much money should be borrowed?
    • Tip: Work backwards and figure out all components required to complete a project or dispatch an order. Very important thing to remember is add profit.
  • From whom it should be borrowed?
    • Tip: Remember owner’s money is most expensive source of money. However I suggest you to discuss with experts when it comes to interest rates and loan terms.
  • Where it should be used?
    • Tip: When money goes out, it either becomes an expense or creates an asset.

Using money from sales:

  • Assuming income through sales has the ability to pay first three stakeholders in order of payment i.e.
  • Hoping the business still has money in form of net profit following questions need to be asked:
    • How much should be reinvested into the business?
      • Tip: If sufficient money is not reinvested then business has to again borrow.
    • What borrowings need to be repaid?
      • Tip: pay off expensive borrowings like credit cards and overdraft.
    • How much should be distributed to shareholders?
      • Tip: Investors will invest only if they can believe you can make more money with their money than they could have made with their own money.