Getting financing used to be a pretty straightforward process. Business owners went to their bank, produced large volumes of documentation on their business and personal finances and then waited, to find out if they were approved and again, to get the actual funding.
In recent years, qualifying for financing—or not—has often been tied to rising and falling economic conditions. The economy can be a factor, but certainly isn’t the only one. And it’s a variable no one can control.
But business owners can control their own “funding readiness,” which simply means assembling and polishing up the tools you need to apply for business capital, ideally before you need it. There are a number of things you can do now to increase the likelihood that, when the time comes, you’ll be a strong candidate for financing.
Know the differences.
Banks aren’t the only game in town and haven’t been for the past few years. There are big banks and small ones, along with organizations like credit unions, who all have different lending criteria and underwriting processes. Increasingly, though, business owners are looking to a whole new group of “alternative” sources of capital, many of which have taken their places in the mainstream and generally tend to be more flexible than their more traditional counterparts. Investigate all your options; understand the differences in the growing field of business capital providers.
Why do you need capital?
You may not have to be specific about why you need financing. But when approaching some types of lenders, you can advance your cause by already having a plan for not only how you’re going to use the capital but also, what results you’re projecting it will generate. If you plan to add a second location, for example, what do you estimate that your additional sales will be? A solid, quantifiable growth plan demonstrates astute planning and financial management, and with some lenders, this will work in your favor.
Dust off and update your business plan.
Again, you may not be required to produce a business plan, but having a stated vision, articulated objectives and well-thought-out and well-crafted plan for achieving them shows that you’re focused and diligent about growing your business.
Have some key documents in order.
One of the complaints about traditional lenders is the amount of paperwork they require, especially for small businesses. Banks will require income statements, P&L statements, balance sheets, tax returns, bank statements, a business plan and more. Other, more “alternative” financing companies usually require much less in the way of paperwork. But why not work toward having these key documents ready and in hand anyway? It’s a worthwhile discipline for any business owner, and you never know when you’ll need them.
Spruce up your business and personal credit records.
Will these records be considered in the financing approval process? Maybe—it all depends. Regardless, it’s smart to look at your credit records like key business documents. While they may not be the factors that seal the deal, the better shape they’re in, the less likely they’ll be to hurt your chances of getting funding.
Do your homework.
Like lenders and business financing companies themselves, what they’re offering varies widely, too. Research and compare types of loans, rates, terms and conditions. For example, banks historically make long-terms loans. Alternative lenders may offer financing for the short-term, as in 12- 18 months. Different loan “products” work for different types of businesses in different situations.
Have some conversations.
It certainly won’t hurt to have a personal conversation or two, to get a sense of the differences in and requirements of financing sources. The best time to do it? Now—before you actually need it.
Image courtesy of creativedoxfoto / FreeDigitalPhotos.net
The post 7 ways you can increase your chances of getting financing appeared first on Business Cash Advance.com.