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Commentary by ROHT ARORA In August, small businesses looking for business loans discovered a mixed bag of outcomes from several sorts of lenders. The total number of loan applications rose during the month.
Getting Business Loans: What To Do And What Not To Do
In the beginning, you could feel a little overwhelmed by the sheer volume of knowledge you haven’t yet learned about company financing. It’s possible that you’ll feel as if you’ve stepped into the shallow end of the pool without realising it. Is there anything you can take consolation in? You’re not alone. Everyone who is new to the world of business financing experiences this. The good news is that there are a few things you can do and not do to keep yourself afloat.
In need to get started with financing your business, there are a few things you really should be doing or making preparations to do. Setting up a solid budget, cutting back on superfluous expenses (such as buying only one six-pack on Bud rather than just two), plus saving the excess money are all excellent suggestions for those just starting out in the world of business finance. You will use the money you save to fund your business. It’s much easier to get startup capital this way because you don’t have to worry about repaying the money you’ve borrowed. When you’re starting a business, this should have been the major source of financing you use.
What else should you be doing? A business strategy, of course. In order to place a smile on your lender’s face and avoid him worrying about whether or not to invest his money in your company, you need a solid business plan. Your business goals and future plans, as well as the reasons why you need the funding and the steps you will take to repay it, will all be outlined in these documents. As long as you have a precise plan for repaying your investors, they’ll make love with you and you’ll get brownie points.
Lastly, when it comes to financing a business, don’t forget to make provisions for unforeseen circumstances. If you want to use the loan for 6 months, you should borrow enough for a year’s worth of expenses. It’s because you never know what obstacles you’ll encounter while putting your company together or when you’ll run into trouble. Being over-prepared rather than under-prepared is preferable to being unprepared at all.
A few “do nots” in the world of small company lending follow next. There is one thing that should never be expected of you: a repayment plan. What kind of person would lend money without first determining how you would receive your money back? The answer is, of course, no! Hence, why would you expect that investors will do the same.
Avoid asking for less cash reserves than you need as a last “don’t” on the list.
Make an honest assessment of the resources you’ll need to get your new firm off the ground, and only ask for what you actually need. Inexperienced business owners fear investors, so they ask for less money than they really need. This is true, but that it won’t help you get far enough in the long run.
The “do’s” and “don’ts” of business finance must be followed in order to thrive.