There’s a lot to think about when your considering starting up your own business.
One of the key areas that many businesses don’t spend enough time considering is the question of finance.
Having the right types of credit facilities in place from the very beginning will give you the flexibility that you need to invest in your business and grow your revenue.
It’s important to talk to an independent financial adviser, to ensure that you’re structuring the finances for your business in the best way. But to help get your thinking started, here’s a couple of questions that you’ll need to have thought through in order to get this process started.
What will you use the money for?
If you’re at the first stages of getting your business up and running, then you’ll most likely need finance or a line of credit in order to manage your day-to-day expenses. Everything from utility bills, to office equipment, and payroll. Your cash-flow projection needs to demonstrate that you’ve got enough cash in the bank to meet all of the obligations that your business is going to incur while you build your revenue.
What type of finance does your business need?
If you don’t have any cash-flow or profit and loss history to demonstrate to a lender that you’re a good credit risk, you might need a simple overdraft and a credit card in order to give you some flexibility. As your business grows and develops, you’ll be able to look at more complex facilities such as revolving credit or invoice financing in order to smooth through any peaks and troughs in your cash-flow projection.
What sort of lender will be able to help you?
Different lenders tend to offer different types of finance products, depending on the type of customers that they’re trying to attract. If you’re just starting up your business, you will probably need to find a lender that specialises in small business loans and lines of credit for new businesses. Shop around if you can and compare the fees and charges that you’re being offered.
What’s your credit score like?
Starting a new business, any bank or financial institution will require you to guarantee any credit facility that they provide to your business. You’re going to need a strong credit score in order to be successful in applying for loans. You can check your credit score before lodging any applications.
What’s your record keeping like?
When going through a loan application process, you’re going to need to be able to present tax returns, bank statements, financial statements, financial projections, and any relevant legal documents. Get your paperwork in order and ready to go before you start approaching financial institutions.