At some point, considering financing options becomes inevitable for many business owners regardless of the size of the business. The quest for financing varies with the nature of business and the needs therein. When opting for business financing, it is important to clarify why you need financing and whether it is absolutely necessary for you to seek financing.
There are a plethora of ways through which you can finance your business ranging from personal funding, raising funds through family and friends, through venture capitalists, angel investors and loans from banks and other financial institutions. In addition to making necessary preparations for your financing, it is important to research the different financing options in order to determine the option that is most palatable to your business. Further, it is equally important to review your eligibility for a loan and more specifically, review your intentions for the funding and repayment schedule/plan.
Here are factors to consider when opting for business financing.
Part 1 – Reviewing your Need for Financing
1 Pinpoint specific goals for your financing
2 Determine the most appropriate financing option for your set goal
3 Provide a detailed plan of your intended use for the funding
4 Identify the ideal time frame for the funding (is your need time-sensitive)
5 Select the lender and product based on the time sensitivity of your need
6 Determine how much funding you require
7 Set out your ideal repayment schedule
8 Reference your revenue projections to set out repayment schedules (long or short-term)
9 Analyze your business and personal credit score to determine your eligibility
Part 2 – Tips for Business Financing
10 Invest your own funds
11 Demonstrate your ability to manage debts
12 Review your collateral options
13 Evaluate the risks and associated costs of different financing options
14 Check that your working capital is retained
15 Demonstrate your business’ profitability
16 Set up good financial habits for your business
17 Leverage professional expertise in evaluating funding options
18 Check that personal funds are separated from business funds
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