Homerun Nievera, Negosentro.com | It’s easier than ever to start a business today, with many business ideas available that you can start from home with little to no capital needed. But, as many business owners will tell you, at some point, you are going to need some funding to get your company off the ground and start turning over a decent profit.
Even if your business is an online-only venture that was insanely cheap to set up, a little extra funding can go a long way when it comes to boosting your online presence, paying for employees or freelancers to help you, and reaching a wider target audience. In turn, your investments will pay off – money can help improve a company’s reputation and expose a brand to more potential customers, leading to further sales and a better turnover.
However, no matter what kind of business you are running, securing business funding isn’t always an easy process. This is especially true if you have decided to go down the traditional route of taking out a business loan from the bank; there will likely be a stringent application process where you’ll be required to prove that you have the means and capacity to repay the loan within the given terms.
So, what can you do to start improving your chances of securing the funding needed to improve your company and start seeing better results? We’ve put together some top tips.
Tip #1. Work on Your Credit Score
Having a poor personal credit score doesn’t just affect your ability to borrow money on a personal basis, it can also affect borrowing for your business. When you apply for a business loan, the bank or lender will almost certainly run a credit check on you, since they will want to be aware of any past financial problems that you have had, as this allows them to determine your level of risk.
But, don’t be fooled – even if your credit score is currently at a good enough point to allow you to borrow further personal credit, past issues can work against you when it comes to getting funding for your business. For example, if you have had missed payments in the past or have several different lines of credit – even if they’re all quite small – the bank or lender may want to know why you haven’t been able to keep up with payments, or why you’ve needed to borrow so many different times.
Don’t forget that failed applications for credit will also show up on your credit score; each time you apply for credit and are rejected, your credit score will take a hit. So, if you’ve been looking at business credit cards, for example, and have had no success, this won’t be a secret to the bank that you apply to for your business loan. See https://creditrepaircompanies.com/credit-inquiries/ for more information about removing credit inquiries from your credit score.
Tip #2. Brush Up Your Business Plan
Since it’s so easy to start your own business online in just a matter of hours today, one of the biggest mistakes that new entrepreneurs are making is a failure to have a well-thought out business plan. Perhaps you’re using a method of business, such as Lean Six Sigma, which encourages entrepreneurs to be more flexible and constantly make revisions, rather than sticking to a rigid business plan – after all, it can be incredibly difficult to make predictions about where your business is likely to be years down the line.
However, bear in mind that even if a lack of business plan seems to be working well for you, it won’t go in your favor when you apply for a business loan. Banks and other traditional lenders need to see how you have thought out your financial future; along with your personal credit score and company financial history, they’ll want to know that you’ve put the effort into creating a plan that details how you’re going to invest the money and what you’re expecting in the way of a return.
If possible, investing in the services of a consultant or mentor who can help you put together an impressive business plan is certainly worth it. Bear in mind that your potential lender will want to see well thought out predictions for the future and a clear plan of action for using their money to improve your business and the amount of profit that you make. You should also detail plans for how you are going to re-invest your profits back into your business, and how you expect to make these profits, for example, describe your marketing strategies. You can also strengthen your business plan by drawing on the actions taken in the past which have led to better financial success. A history of success, no matter how small, will certainly sway lenders somewhat in your favor as they’ll have evidence in front of them that you know how to invest wisely for good results.
Tip #3. Consider the Alternatives
Lastly, it’s important to bear in mind that securing business funding is not always guaranteed. Even if you’ve managed to improve your credit score substantially and written an excellent business plan, lenders can refuse to accept your application for several reasons. If you don’t get the result that you want, it’s also a good idea to ask the lender if they can provide you with more information on why they came to that decision – this can help you to make improvements where needed to boost your chances of getting funding in the future if required.
However, all is not lost – if you cannot get funding from your bank, there are several alternatives that you can turn to. For example, today, there are many companies set up specifically to provide small businesses with funding; these tend to have less strict application processes and you’re more likely to be accepted there than at the bank.
For an alternative method that won’t affect your credit score, crowdfunding for business is a viable option that’s becoming more and more popular today. Although it’s possible to get donations via crowdfunding for your company, it’s more likely that the donors will be classed as investors, so you’ll need to be prepared to give them a cut of your profit in the future.
Did these tips help? We’d love to hear from you in the comments.
Homerun Nievera is the publisher of Negosentro.com and WorldExecutivesDigest.com. He has interests in several tech and digital businesses as director and chief strategist.