Entrepreneurs have enough trouble as it is getting the funds they need to get their enterprises off the ground, however, recent research from the U.S. Small Business Administration (SBA) Office of Advocacy revealed coming across startup capital is increasingly difficult for new high-tech businesses, as well as non-technology firms created by African Americans, Latinos and women.
Why is tech banking more difficult?
Innovations in technology are seemingly popping up every day, while other inventions are in development. The author of the report, Alicia Robb, senior research fellow at Kauffman Foundation, found banks are less willing to dole out funding based upon the knowledge possessed by high-tech businesses, compared to those that can put up collateral. Patents, copyrights and trademarks accumulated by high-tech firms don't really interest banks and are less likely to help such enterprises acquire lending approval.
"We know that startup businesses with access to financing drive innovation, job creation, and economic growth," said Dr. Winslow Sargeant, chief counsel for the SBA Office of Advocacy. "Policies that help close the financing gaps for minorities and women and for high-tech startups will benefit the whole economy."
How can high-tech, minority- and women-owned firms attract lenders?
There are many opportunities made available by the SBA for minorities and women business owners to apply for loans, but these entrepreneurs also need to get better at luring potential lenders to pour funds into their their firm. Below are a few tips to help all small-business owners learn how to make lending to their enterprise an opportunity banks, investors and capital managers can't pass up:
- Develop a strong brand identity: Small-business owners who are able to set their firm apart from others will be considered first by potential lenders.
- Create a stellar business plan: When evaluating a company to see if it is worthy of receiving a loan, one of the first things that is considered is the firm's business plan. By doing enough research and putting time and effort into the plan, small-business owners will find it easier to attract lenders.
- Don't be afraid to network: Word-of-mouth marketing is something companies rely on for more than just product or service promotion, and by meeting new people and getting the word out about the brand, small-business owners will see most interest accumulate.
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