Image by mohamed Hassan from Pixabay
By Henry Brown
The early stages of starting a small business will largely revolve around finding funding. We’ve already provided a few tips on how to get the funding you need for your small business, so feel free to check out that guide if you want some free advice.
However, today’s post will focus more on some of the reasons you’re struggling to gain funding, even after going through the steps outlined in that previous post. Why are your loan applications or investment pitches being rejected by everyone? Most likely, it’s because of these three reasons…
Risks within the industry
The industry you’ve chosen to start a business in is volatile. This means there are lots of risks and things that investors or banks just aren’t sure of. A good example of this is a business in the cannabis industry. Many people are trying to start companies right now, needing investment for cannabis grow rooms, seeds, cultivation coolers, and all sorts of other stuff. It’s an exciting and new industry that’s growing year by year, yet business owners are failing to get funding.
Why?
Because there are so many legal issues surrounding the industry and so many things that people don’t know about. So investors and banks are cautious to offer funding as they can’t trust that the industry will survive. If you’ve chosen a business idea in a sector that’s a bit volatile or high-risk, this could be why you’re struggling to get any funding.
No future
Often, small businesses fail to get funding because there’s simply no future in the idea. This happens when you try to capitalize on a specific trend. Right now, that trend is very popular and you could make a decent amount of money.
However, the future remains uncertain. Or, more accurately, investors are almost certain that the future is bleak. They withhold funds as they don’t want to spend money on a business idea that will only generate sales for a few months. They want continued success over many years! For business loans, banks have no guarantee that they’ll get the money back if they’re lending it to a business that’s based on a trend with no clear future in sight.
No examples of success
You’ve come up with an excellent business idea that you think is totally unique and fills a gap in the market. You’re trying to get funding for it, but nobody is interested. Why? Well, it’s probably because there are no examples of this business succeeding. Yes, your idea may be unique, but this means it’s riskier.
How will lenders or investors know that it will work?
There are no examples of other companies with a similar idea having success. If you can demonstrate that there’s a big demand for what you offer, then there’s a higher chance of funders trusting your business.
Have you been rejected multiple times by banks or other investors? If so, it was most likely down to one of the three issues above. Work on correcting these problems and you have a greater chance of gaining the capital needed to start your small business.
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Henry Brown is an online marketing executive. When he isn’t talking shop, he’s roaming the streets of London, uncovering the extra-ordinary in the ordinary.
