When you are getting ready to start a business, you have to think about how you will obtain financing. In fact, this is one of the most important parts of your decision and it can be one of the most challenging. There are several ways to obtain financing for a new business or to obtain financing for an existing business. However, you have to think about these things in advance. There are various things to consider when you are thinking about business finance. What type of financing is appropriate for your particular business? Are you aware of crowdfunding? Are angel investors available to you? If so, what is going to be your approach? You have to be well prepared and armed with a good business plan to consider these options.
There are some financing options that require the business owner to relinquish a percentage of full ownership to the investor or funder. Some investors have strict guidelines and limitations before they will consider a loan or investment in someone’s business. There are also some financial investors that will require the borrower to adhere to certain rules and if broken, they will apply substantial consequences financially.
The Wrong One
If you have been searching for that business loan and it seems to be elusive to you, then you are not alone. Have you had a rejection when you tried to apply for a business loan? You are still not the only business that has ever been declined. It happens all of the time. Why? Many business owners are not prepared and sometimes, it is because they approach the wrong financial investor or lender. Most banks take a conservative approach to lending and these come with a wide range of requirements, which tend to be stringent and sometimes unnecessary to the normal person. If you are choosing to deal with a bank, you have to provide up to three years of financial statements, collateral, cosigner and the demonstration of business profitability.
Not All Equal
Not every business owner is able to meet the stringent requirements and this is especially true for most small businesses since they put so much of their savings into the business. Many of them have little or no collateral to put up. Under such conditions, how does a small business owner able to see financial growth? Let’s take a look at the most common financial issue.
For most companies, a payment term has to be offered to the clients, but some clients do not honor those terms. This is one condition that indicates business owners have to wait for up to three months after delivering the product to be paid. This is a problem for many small business owners because there are little resources left to pay expenses while waiting for almost two months to get paid for an invoice. It is an easy thing to overextend yourself financially when you have clients not paying their invoice. In the same way that the client forfeits the agreement to pay, it is the same way that small business owners operate with vendors and suppliers – waiting longer to pay. This is the not the ideal business practice.
The Bottom Line
No matter what the issue, small business owners need money to survive the business. You have to be creative when it comes to funding. The first option is asking family members and friends to help financially. When that fails or is exhausted, turn to other means of financing.