It’s never nice to think that your business is struggling. Especially when you need the help of a lender to get through. But business finance is extremely common and many businesses greatly benefit from it.
But there are a few things you need to consider before you apply for finance. Below are 11 things you need to think about before you take next steps.
#1 – Don’t Panic!
It’s very easy to overthink your financial situation. It’s also very easy to panic and inflate something that may not be an issue. You may not need funding right now, so make sure you have a clear head before considering finance options.
#2 – Assess Your Finances
It may be that your finances are not quite accurate. It may also be that your finances are easily fixed with a few changes. See what you’re dealing with and employ the help of an accountant before deciding whether or not your business needs financial help.
Image credit: stokkete via 123RF
#3 – Check Your Personal Credit History
Many lenders will look into your personal credit history when you apply for finance (even if it’s for a business). Make sure that you as the business owner are clean financially, as this could affect your ability to apply for business finance.
#4 – Know Your Capacity For Collateral
Some lenders may also require you to put down collateral. This means putting something of value at risk should you not be able to pay off your loan. Think carefully about what you can use as collateral and be aware of the overall risk involved.
#5 – Plan How Much You Need
Do not borrow more than you need, as you could be creating a rod for your own back. The more you borrow, the more you have to pay back. Using your knowledge of finances from earlier (see #2) you can determine just how much you need.
Image credit: tunedin123 via 123RF
#6 – Plan How You’ll Pay It Back
Now you have an idea of how much you wish to borrow, you need to figure out how you’re going to pay it back. Think about how much your business earns, ongoing costs etc. Make sure you’re able to set money aside to pay your loan off.
#7 – Research Your Finance Options
There are many finance options available to businesses, from a simple business loan to disclosed invoice finance. If your business is usually running great and you’re just in a rough patch, then a business loan may be for you. If you rely on customers paying invoices and have ongoing trouble then invoice finance may be more suitable.
#8 – Choose an Option That’s Right For You
Try not to jump on the first person to offer you funding. Think carefully about what each finance option can offer you and your business. Get quotes from various lenders and figure out which one best suits you and your business needs.
Image credit: Warakorn Harnprasop via 123RF
#9 – Know What The T’s & C’s Are
Some options may seem too good to be true and some of them are. Make sure you ask as many questions as you can about what it is your business is applying for and how it will affect you in the long term.
#10 – Be Open and Honest
When applying for finance you need to be 100% honest about yourself and your business. You should never lie to a lender in order to get funding. Be open and honest about your business and let them know if there is anything they ought to know.
#11 – Don’t Sign Anything You Haven’t Read
It may sound like an obvious thing to say, but you need to be 100% sure of what you’re signing up to. Especially when it comes to the final contract, you need to make sure you have read every page and fully understand everything within it.
Feature image credit: convisum via 123RF