Capital is essential to your business. When cash flow is good, you’re on top of the world. If you get to a point where you need an influx of money, it can be very stressful applying for business financing. When you’re looking for financial assistance, avoid these mistakes that many owners make.
You Believe a Loan Is Your Only Option
There are many different types of business financing. Banks and credit unions are not your only options. You should research different funding methods when you don’t need it. Check into venture capital funding or turn to friends and family as investors. Your industry may offer grants. Speak to others in the community and your mentors to find out what your options are.
You Aren’t Paying Attention to Details
When you get the loan application, make sure that you pay attention to everything the lender is asking for. You don’t want to be vague when discussing your corporate vision. This is one place where over-explanation helps the loan officer see how dedicated you are to your company. Have a marketing plan. Explain what research you’ve done into the market. Provide your sales strategy and your goals, both long and short term goals. Know what you are going to use the money for. Have a clear plan as to how it will benefit your company, and be able to make projections about how you will pay it back.
You Don’t Read the Fine Print
It’s insufficient to let the financial representative from the lending company go over the contract quickly in their office. You need to take it home and read over it. Make notes and ask questions when you don’t understand something. You may even want your lawyer to review it. Signing anything without looking at all the details may present long-term challenges ahead, especially if any of the terms are unfavorable.
You Dismiss Your Credit Rating
New business owners should not discount the impact of their own personal credit score. Even established businesses will often have the creditworthiness of the owners checked before they obtain business financing. Monitor your own credit score as well as that of your organization and when you do need to obtain a loan, you aren’t scrambling to correct mistakes and fix errors.
Learn From Your Mistakes
Avoid these mistakes when you apply for business financing. If you are denied funding, ask the lender what could improve your chances next time. Look for other options, such as factoring, to get the cash flow you need immediately and then work to fix the problems in your loan application process.