You have a head spinning with business ideas but you encounter difficulties in financing? Or you have recently started your great potential business but are not yet turning profit? A fundamental aspect for your business, financing is usually most frequent obstacle in starting a business. You have option of resorting to a business incubator on condition that your business idea seems viable and promising. Now if you wonder how they are going to find out whether your idea is worth investing, answer is a very sensible (and predictable) one: by analyzing your business plan.

What are business incubators? How many types are there?

A business incubator is a system offering support for start-up businesses or recently founded ones. The facilities it offers go from financing, inexpensive office space, various business services (such as secretarial assistance) to management advice and support. Their role is to produce viable, standalone companies at end of program they are included in. Also, selection they perform works like a measurement unit for viability of applicant business and gives entrepreneurs a chance to re-think their business strategy. The success rate of businesses created by incubators is of around 85%.

There are two categories of incubator sponsors: profit and non-profit.

• Non-profit entities are supported by state or a local government directly, through a college or university, or in conjunction with a chamber of commerce. Such incubators have been used to achieve social and economical objectives as decreasing unemployment rate, increasing enterprise formation rate, social assistance for disadvantaged groups - youth, minorities, enhancing regional economy etc.
• Private companies are generally looking to make a profit. Applying for a program of such incubators should be highly questionable and a matter for thorough analysis, as it may involve long-term hindering agreements, or sharing a percentage of 20 to 80 of company ownership and it just may not be worth it.

Lenders are looking to satisfy themselves of following: 1. That business can make regular interest and principal payments 2. That lender can get its money back if something goes wrong

When approaching a financial institution, you are effectively selling merits of your business and your proposal. Consider needs of lender, if you were lending money to someone what would you ask for?

Be prepared to answer questions about your industry, your company, your management, principals of company and financial statements.

If you are looking to finance property or used equipment, you will most likely need an appraisal.

In today's environment, an environmental study may be required on commercial real estate.

Lenders will look at ability to service debt. You will need to show an ability to service debt plus a sufficient surplus to cover any contingencies, such as unexpected costs or a drop in sales. Use 1.4 times coverage as a guide; both historical financial statements and a cash flow forecast and projected income statement will show this.

The bank will want to make sure that existing debt, or addition of new debt, will not bring Debt/Tangible Net Worth ratio of company too high. What figure is used depends on industry you are in and what stage of growth you are at. Don't be surprised if bank asks for hard security to help support lending request.