All small business owners can agree that when it comes to running and growing their business, cash is king. This is true whether you are starting a new product or service or are an established business trying to stay profitable. When it comes to getting business funding, there are some important things that need to be taken into account. So what are some of the common mistakes that business owners make when trying to get funding, and can they be avoided?
Trying to get the wrong kind of funding
One of the most common mistakes business owners make when trying to get a loan is not knowing what kinds of business loans are out there. There are many different kinds of loans, such as working capital, business refinancing, invoice financing, and traditional bank loans. Each has its own set of pros and cons and needs. Before you ask for a loan, you should know what the differences are so you can choose the best one for your business.
Failing to plan
Before talking to a potential lender, take the time to do your research and make sure you can meet the responsibilities you agree to. Make sure you know what you want to do and why you need money. Some lenders will want to know what you are doing with money, others won’t. But either way, it's important that you are very clear about how this funding will be put to use and how you will pay it back. It’s always best to use your funding for growth-enhancing activities, rather than to plug holes. That way, the funding will grow your business rather than just get you out of a tight spot.
Information that isn’t complete
When you ask for small business funding, you will need to have all of your business's paperwork and financial information up to date. Your banking file should show that you can pay back the loan on time. Lenders like Merchant Capital will need information like a lease agreement or proof of property ownership, bank statements, merchant statements, and contact information for two suppliers.
History of bad credit
Bad credit history can hurt your chances of getting any kind of loan, including a cash advance. Before you apply, you should make sure you have everything in order. This will give your application the best chance of being accepted. Good credit scores are important if you want to be able to get loans and other forms of credit in the future. If your credit scores are low, you're in luck, as there are things you can do to raise them and get your business back on track for growth.
Trying to get either too little or too much money
You're smart to limit how much debt you get into. But if you underestimate how much working capital you need, your business could face a major cash shortage. If a business asks for too much, it will have less cash flow because it will have to pay back both the capital and the interest. You will also have to pay back more than you need to, which will hurt your cash flow even more.
The bottom line
Access to working capital is essential to run and grow your business. Whether you're in the market for funding or not, it is wise to take the time to research what is out there and get your business affairs in order. So that when the time comes to jump on an opportunity, you are well-equipped to make quick and smart decisions, and avoid the common mistakes made by many local business owners. To fund your growing business in the next 48 hours, contact Merchant Capital today.