Securing funds for a small business or a startup can be a complicated process. The nature of risks involved in starting a new business is, at times, uncertain. Established businesses, on the other hand, can secure finances without running into any inherent risk.
If only securing financial assistance for startups was as easy as getting the Spectrum Gold package, nine out of ten people would be entrepreneurs. But before we look into various ways through which you can get your business up and running, let’s discuss several important things.
Prepare a Realistic Business Plan
Your business plan should be detailed, comprehensive, and include different scenarios (best, likely, and worst). Conduct in-depth research into the market and back up your results with factual information and data. Your lender should know that you have done your homework. Your business plan should include a 12-month cash flow projection. You can hire professionals to help you with this. (Checking this URL would also be helpful in this regard). Before hiring any professional, you must check Newchip Accelerator Reviews so you know that they are reliable or not.
Know Your Financing Needs
This is perhaps the most important thing you need to keep in mind before you apply for a business loan. You should know the numbers in the financial assistance you will need for your business. Also, how do you intend to use the funds? How long will it take you to pay back the loan? How will you pay it back? Knowing the answers to these questions will enable you to present a convincing pitch to potential lenders.
Have a Strong Credit Score
Lenders are hesitant to invest in businesses with poor credit history. Check your personal credit score prior to applying for a business loan. Your lender will be more likely to provide you with a loan if they see that you are proactive in your loan payments. Be prepared to explain red flags, if there are, on your credit history. In case you are already running a business, seek a credit line from your existing suppliers in order to build your business credit score. It will also help you with business loan funding.
Inform Your Lender About Your Current Business Situation
Compile a report card. Do not forget to include your business key performance indicators (KPIs) in it. Make sure that you present accurate and up-to-date financial records to your potential lender. These may include income statements, balance sheets, and account receivables and payable reports. You can contract the services of a professional accountant to assist you in the preparation of your financial statements. Also, do not fall back on all your government remittances.
Be Transparent About Your Situation
Hiding any negative result can damage trust between you and potential lenders. It is important you clearly explain your current standing to potential lenders. By being truthful and forthcoming, you can approach an understanding with the other party involved.
Keeping the above mentioned in mind, you can seek finances for your business. Here are some business financing options:
Government loans
Governments around the world offer these types of loans to both individuals and private businesses. In the United States, the Small Business Administration (SBA) provides various types of loans to businesses. These include disaster loans, small business loans, the CDC/504 loan program, the microloan program, and industrial loans. Loan seekers are encouraged to create a loan package with a participating lender. In return, the government guarantees a portion of the loan and will repay the lender in case the borrower defaults.
Loans from venture capitalists
Venture capital is a form of private equity financing angel investors contribute to small businesses and start-ups. With a venture capital financing source, you can cover your day-to-day expenses such as equipment purchases and pay orders. Venture capitalists seek equity in return for their contributions.
Crowdfunding
Crowdfunding has emerged as a popular source of funding for nascent businesses. Online crowdfunding platforms like Kickstarter and GoFundMe are popular with startups that need quick funding to meet their expenses. Crowdfunding involves individuals and organizations who fund projects in return for a potential profit or reward.
Commercial mortgage loan
Businesses use commercial mortgage loans to develop existing or new commercial properties. Mortgage lenders usually provide up to 70% of the property’s value, allowing the business to pay its regular mortgage payments.
Loan for equipment purchase
This type of loan allows businesses to fund 80% of the total price of the item they intend to purchase. You can only use this financing option to purchase new business equipment, modernize operations, or replace outdated machinery.
Equipment lease
An equipment lease agreement allows the lessee to use the equipment (provided by the lessor) for a specified period of time. Equipment leases usually involve factory machines, vehicles, or any other equipment.
Credit unions
Credit unions are similar to commercial banks. A credit union is a member-owned financial cooperative. Credit unions, like banks, accept deposits and issue loans. The major difference between a credit union and a commercial bank is that the former operates on a not-for-profit basis. Credit unions are considered a safe place to borrow money.