You're a small business owner and have decided you need funding to help your business grow, take on more staff, buy equipment or to simply inject working capital. The good news is that small firms no longer only have the option of going to their bank!
Dream Big! (but not too big…)
It’s important to dream big but reality check how much funding you can apply for as a business. The single biggest mistake businesses make is that they ask for too much funding and get turned down because they can’t afford it. Be realistic about how much you can apply for – typically 20-25% of your annual revenues is where lenders feel comfortable with unsecured lending.
Don’t wait until the last minute to look for funding – you have more options if you start early. The earlier you start looking for funding the more options you will have. You can use Funding Xchange as a simple tool to understand the offers available to you by completing a funding request in just six minutes.
Be passionate about your business
But don’t forget to have solid financial reporting and forecasting. Lenders may want to understand how aware you are of the commercial performance of your business and how you see your business growing in the future. It is important to put together well structured financial plans and be sensible when thinking about the future.
It’s the boring stuff that matters
Pay invoices on time and file your accounts! A good payment history is important when lenders assess your business' creditworthiness. It's just like making sure you pay your household bills on time for personal finance. Keep on top of everything.
Keep business & personal finances separate
We know that business and personal life are inseparable for entrepreneurs – but keep your finances separate. Lenders want to understand what income and expenditure is related to the business and what is personal to the owner. Having separate accounts also shows that you are serious about your business.
Keep track of your business credit
Just like you would do for your personal credit score. It's vital that you understand what your credit score says about your business and that you know what factors are impacting your score. County Court Judgments (CCJs) and bankruptcy paints your business in an unfavourable light. A CCJ against your business will remain on your credit file for six years and could make it harder for you to access credit.
Personal finances do matter
Especially if you are looking for an unsecured loan. While lenders want separation of business and personal finance, they will assess also your personal credit history - especially if your business is still relatively new or you are a sole trader. If you have a strong credit record you can even consider taking out a personal loan - this could be less expensive but makes you personally liable.
You don’t need to have a perfect credit score
Running a business is tough and lenders can be surprisingly understanding when it comes to minor credit issues. Don’t despair if your personal credit score is not stellar or your business has faced issues in the past - there might be other options out there to funding your business.
Research lenders and get multiple quotes
It pays big time to compare available options so make sure you compare interest costs as well as any fees - especially for short-term funding the fees may be higher than the interest expenses. Ask funders to provide you with quotes that show you transparently the total costs of funding to make it easier to compare different quotes - or use Funding Xchange to get offers in a standardised, simple format that doesn’t affect your credit score.
Are you willing to provide a personal guarantee?
Many lenders will ask business owners/directors to provide a personal guarantee. This means that if the company is unable to repay, the owners/directors are liable to repay the debt. Lenders often look at personal guarantees to see if the business owner believes in their business.
Most importantly…We are here to help
At Funding Xchange, we have over 45 lenders waiting to compete for your business and a team of Business Funding specialists on hand to help you identify the best funding for you – whatever the reason.
*Taken from an exert of the Funding Xchange SME Funding Guide Part 2
Join us at the Enterprising Women Summit 2017 – 16 June
Katrin will be speaking at The Enterprising Women Summit 2017on 16 June. Join us and some of the country’s most inspirational business women to hear fascinating stories, learn how to implement lasting changes in your company and leave motivated to accelerate your career.
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