Don’t Make These Mistakes When Getting a Working Capital Loan
As you begin managing your small business, you will find finance management is a huge challenge. Although you have made a significant investment in location, products, training or marketing tools, daily operations continue to dwindle your supply of working capital. Costs to meet payroll, lease agreements, supplies and suppliers continue to accumulate even if your business isn’t bringing in the revenue needed to sustain both operations and growth. Unfortunately, its whatever funds are leftover that are used for investing in new opportunities and growth.
If you don’t have enough cash to meet daily expenses, you can soon find yourself out of business. You can seek out additional financing to carry you through, but be careful of these four mistakes when looking for a loan.
Failure to understand the best funding option for your needs.
There are many ways to access quick cash, but are they the best choice for your business? Term loans are always an option, but fledgling businesses doesn’t often qualify. Factoring and accounts receivable financing might be good, but how strong is your client’s credibility?
Failure to have a solid business plan.
While you may already thought through your business and carefully analyzed each aspect of operation, a solid written plan should be available as you meet with lenders. It should offer an overview of your business, comprehensive review of your products and services, as well as provide information on your revenue, cash flow and projected financials. This is critical if you are going to avoid mistake number three when looking for working capital.
Failing to be prepared when meeting a potential lender.
You know you offer great product and have a stellar plan in place, but can you convince a lender who looks past your enthusiasm and straight at the paperwork? A paperwork trail supporting your statements and validating your arguments will be the best way to achieve lender support. Enter the office with your business plan, financials for the past year, tax returns for three years and any documentation pertaining to ownership, filings and business agreements.
Failure to update your credit information.
Know your credit score before seeking loan approval. You will know areas where you can improve your score and possible reasons for denial. The higher score the more likely you will obtain a lending offer, but you will also be able to negotiate a lending rate.
Whether you choose a loan or invoice factoring for your working capital, there financial options available to help your small business succeed.