When we are planning to start a business, money is often rated high up on the list. Here are things we should do to properly finance our new business:
- Find out how much we need: The best way to start is by finding out how much we need. It should be a great start if we have some capital available, so we don’t have to apply for a large amount of loan. We should ask experienced professionals and family members on the ideal amount of money we should obtain. However, they will ask for our well thought out business plan, before they can share their opinions. The size of our business and the type of product could significantly determine how much we need.
- Identify what we need: We should know what we need to know how much capital we need. The money will be used to pay the franchise fee, buy inventory, purchase equipment, pay employees during their first month of work and others. Lenders offer different types of loans, so we should choose the one that matches our requirements.
- Research our options: There are lenders that provide focus in different market areas. Credit unions and local banks are the most obvious places to start. It is preferable if we have good enough relationships with the business development officers or we could be referred to these people. If this position isn’t available in the local bank, we should ask to speak with a manager. Due to some factors, the bank may not be able to help, so we should make better preparation, such as providing evidences why we need the loan. We could also use accounts receivables as collaterals to encourage lenders provide us with financial assistances. Regardless of what bank or union we choose, we should make sure that we are comfortable working with them.
- Improve our loan application: Asking money for our business isn’t enough, we should also be able to prove to the bank that we can repay the loan. As an example, we should submit our business plan and provides detailed explanation how each cent of the money will be used and whether it will contribute in the increase of revenue. When supporting our loan application, we should also check our credit history and credit score. These two things are essential in the financial world. If our credit score is poor, then we should be able to clearly explain it and the lender should be comfortable with our explanation, then they could be more willing to approve our loan application. As an example, we might need to spend a large amount of money due to natural disaster and we had to apply for loan to repair our home and car. In this case, our low credit score is explainable. Often lower credit score is caused by mistakes in our reports, so we should check it for errors. We should eliminate these problems before applying a loan.
Obtaining loan should be easy, if we know how to do it properly.