Many small business owners struggle with obtaining business finance,
When your business is in its starting phase, you need a loan to grow it. Yes, helios-apotheke-hannover there are ways for you to start your business with very little capital, but even in the age of the internet you need loans for the growth and expansion of your business. Oftentimes, startup and small business owners are scared of taking loans because they believe returning the same loan with interest on it will hinder their growth. The fact is a loan is not such a big liability if you have done your homework before getting it. Hastily getting a loan without researching the market and knowing your business’ growth potential can be detrimental to the business.
Your Business Plan Matters Big Time
It does not matter how experienced your management team is when your business plan is weak. When you ask for a loan from lenders, they are trying to find reasons to forward you the desired loan. They want to be sure that the loan they forward is returned in time and according to the terms and conditions set at the time of loaning. Lenders will seldom gauge the potential of your business to return the loan based on what you speak. What they want to see is a solid business plan and that’s why you need to have an impressive one. A strong business plan will consist of the following and some more. sonnen-hannover
- The company description
- Management role and experience
- The product description
- Strategy for marketing
- Financial projections
- An executive summary
- Documented cash flow
Keep in mind that banks often look at the cash flow in the documented form, and their scrutiny is not limited to what your projections are for the future but more importantly how you have managed things in the past. They will look at your company’s cash flow records for past couple of years to see if you should be given the loan you are asking for. So, keep your business plan in mind and make sure you have worked on every aspect of it to present something impressive to the investors.
Your Loan Options Are Many
Sometimes, you have a solid business plan and everything else is in place, but your understanding of loan options is not at its best. Many small business owners live with the impression that the only institution available to them for obtaining a loan is a bank. That’s far from truth because there are dozens of other ways to obtain the loan or investment for your startups that’s much easier to manage than a bank loan. Some of the options available to you include SBA loans from the government, invoice financing, business equipment financing loans, etc. If you are just a startup and none of those options seem viable to you, there is online fundraising. mnl168
Online fundraising has become quite a popular method of getting investments for your startup from individuals who trust in your idea and concept of the business. Using funding website you have access to hundreds of thousands of investors located all around the world that are willing to help if you can convince them with your business plan and the team that’s behind your project. So, avoid making the mistake that many small business owners make when they think bank is the only place for them to get any money for their businesses.
Your Timing to Apply for a Loan Is Important
This is a huge mistake that small business owners often make and pay the price in the form of not being able to obtain the loan they want at the terms they want. See, you will always be told to have a strong business plan because that’s the only way investors will trust you as an entrepreneur or businessperson. When you create your business plan, you are not just jotting down random numbers on a piece of paper. Your plan should give you an idea of what your business’ needs will be in the coming times. That’s when it makes sense to apply for loans well in advance and not at the eleventh hour. choicecamp
When you apply for a loan at the eleventh hour, you are seen as a business in trouble. Most investors will see your business as the sinking ship and they will never want to get on it. Obtaining a loan in these circumstances can become close to impossible. This is the reason why you should apply for a business loan in advance and not at exactly the moment you need it. You also have to keep in mind that loan approval process takes time too. If you need the cash on an urgent basis, every day that passes during the approval process will be causing more damage to your business.
The Right People Can Make the Difference
Delegating responsibilities to the right people is an art and skill that not many business owners have. Oftentimes, small business owners rely too much on their own skills and are scared to trust any other person to do things for them. This can be a grave mistake because you cannot be the jack and master of all the trades at the same time. For example, you might be great at crunching numbers and making accurate projections for the business but not very great at sales and pitching ideas. If you have to pitch your business idea, its marketability and scope to the investors, choose the person who can best present it. Despite your great business plan, you will fail to obtain a loan because of your nervousness and lack of confidence when it comes to acting like a clever salesperson. nanum1st
You have to bear in mind that investors are not investing only in your business, they are also investing in you. It is very important for them to like your personality to invest in your project. Appearing unprepared or nervous in front of them will send an impression that you are not fit to lead the project, your decision making is faulty and that you cannot create strong teams.
A Well-prepared Presentation Can Win Hearts
It does not matter who is giving the presentation when the content is boring and does not address the points that investors are most curious to know. First, get your numbers straight and bring them into the presentation at the right points. Be the investor in your mind and think of the questions you would ask if someone presented the same product/service to you. Have your accountant, advisor and business lawyer by your side when preparing the presentation. You don’t want to give wrong figures during the presentation and fall for a bad deal at the end of it. The most important thing is to explain your business idea as clearly as possible. Many times the presentations are so all-over-the-place that investors can’t make heads and tails of it. If they don’t understand your business, they will never invest. and there is absolutely nothing unusual about this. Getting a business loan for small businesses, such as retailers, restaurants, garages and so on, is not as simple as one would think from the bank.
This is not to say however, that getting a business loan is not possible. It all depends on where one goes looking for the loan. Typically, there are two primary options that business owners have, approaching their local banks and going to a private funder or lender.
Banks and small business loans
Banks look at applications for small business loans from their perspective and their perspective is determined by their criteria. When we speak of criteria, there are numerous criteria and these are all non-flexible as well as stringent.
Typically, banks require high credit scores, which should be around about 700 or over. If a business applying for a loan with the bank lacks excellent credit, their application will be rejected simply based on that one criteria. In conclusion to banks and credit scores, business funding with bad credit with a bank is not a possibility.
This is not to say that there are not a number of other criteria, chironprojectsbv which banks follow carefully and take equally seriously as well. The criteria of banks have been established over the decades based on shared experience, and these criteria are across the board.
As is generally acknowledged, banks are not very keen on funding small business loans. The reasons for this are many and one of the primary reasons is that, small businesses are considered to be high risk investments from the banks perspective and experience.
Private funders and small business loans
With a private lender the situation is completely different from what a business owner will experience with a bank. Private lenders have a completely different list of criteria to provide cash advance for business owners.
As private lenders primarily offer MCA (Merchant Cash Advances), the criteria for these is simple. An MCA loan is an unsecured loan, and does not require high credit scores either. As a result it’s easy to qualify for this kind of funding.
However, many a small business owners don’t look upon MCAs from a friendly perspective, and they do have their reasons. The interest rates are higher than traditional bank loans, and most business owners want low interest rates.
The point with MCAs is however not to compete with bank financing, as they are both in quite different arenas. Apart from the fact that they are both financing for businesses, the entire process, requirements, features and all other details related to the funding are completely different.
With an MCA loan the question how to qualify for small business loans does not really apply. Only in very few cases are small businesses turned away by private lenders. Generally, most businesses receive the funding they require for their business.
MCA loans V/S bank loans
Merchant cash advances or MCA in short are generally accompanied with high interest rates. Far higher than what the bank provides, and the reason for this is these are unsecured short term loans.
There are many businesses who would never qualify for a traditional bank loan, regardless of how badly they need it or want it. If their credit scores are low, or if they are unable to provide the collateral the banks require their applications will be rejected. This is not to say that there are not a lot of other grounds on which small business loan applications are not declined by banks. Also, banks are under not obligation to provide funding to those they choose not to. This leaves many small business with no other option.