If you’re looking to start your own business, one of the key milestones is securing the finance or funding that you need.
While you will no doubt be using your personal savings to invest in the future of your business, it’s highly likely that you’ll need some additional small business financing in order to get your dream business up and running.
But when you’re just starting out, getting credit approval from financial institutions is not easy.
Here’s a few steps to consider before you embark on that process.
Why does your business need funding?
Before you start working out how much funding your business needs, it’s really important to have a clear understanding of why you need finance for your business. Do you need cover for your day-to-day expenses? Do you need to invest in equipment or skills in order to grow your business? Do you need to have a cash buffer in order to smooth out some of the peaks and troughs in your cash-flow?
What is the right type of loan for you?
There’s lots of different types of lending products available in the market, so it’s important to do some research so that you know the type of loan that you need. You might need something as simple as a credit card, an overdraft, or a line of credit. As your business grows, you might be able to look at more sophisticated products such as invoice financing.
What sort of financial institution is best for your business?
Not all banks are the same – there are some financial institutions that specialise in start-up businesses or micro-lending. The important thing is to do your research, shop around, and make sure you compare the fees and charges of the various packages available to you.
Are you a good credit risk?
Even though you are looking to borrow funds for your business, ultimately the financial institution is going to be looking at whether they consider you to be a good credit risk. What is your personal credit score? Have you been declined for credit recently? What are your personal assets and liabilities.
Are you ready to begin the application process?
Any financial institution that you’re applying to will need a lot of information from you – make sure that you’ve got your documentation ready, everything from tax returns, to bank statements, and all the legal documents relating to the set-up of your business.