3 Financing Tips for Small Businesses
Financing is the lifeblood of small businesses. While it might not cost anything to come up with a concept for a business, it certainly does take money to get up off the ground, and expand once you’re up and running.
If you’re just starting out, you may need anything from an office or storefront to point-of-sale or back-end computing systems to physical equipment, whether it’s a backhoe or a printer/copier. And even if your small business does start to generate a little bit of money, you’ll probably still need financing to make the serious leaps and bounds it takes a company to achieve real growth – hiring more personnel, advertising more broadly, researching and building new products.
Is your small business at a point where you need to consider financing to take that big next (or first!) step? The following are a few financing tips for your small business, including increasing your chances of getting approved.
3 Small Business Financing Tips
1. Know Your Situation: Where you are in the business cycle will largely dictate what kind of financing you can go after. For instance, if you already have an established small business, you’re likely looking at a business expansion loan from a traditional lender, such as a bank or credit union. However, if you have a startup, that might be a problem, as traditional lenders often want to see that you’re able to repay loans. This means demonstrating that you have cash flow, which startups can’t do. Thus, you’ll have to rely on alternative sources of financing. This can include everything from hitting up family members for a small loan to setting up a crowdfunding effort to applying for a Small Business Administration microloan.
2. Show Responsibility: If you do have an established business and are looking to expand, again, you’ll have to prove to a bank, savings and loan company or other lender that you’re actually good for the loan. Lenders typically will check your credit reports – and in the case where your loan is tethered to a project from a single client, they might even check the client’s credit – so be diligent about paying all bills on time. Again, you’ll need to be able to show that your company actually generates positive cash flow. Also, be responsible about taking out loans, as piling on too much debt can scare away future lenders.
3. Research and Compare: Yes, the small-business loan industry is not exactly on your side; you represent a lot of risk and not a ton of reward. Still, if you’re looking for business expansion financing, you’ll probably find that you have at least a few options – and that’s when you have a little power to make a decision that’s best for you. You’ll need to dig into the cost of loans, for instance, and different lenders may use different metrics, from annual percentage rate (APR) to cents of interest to dollar borrowed. You also might have to do the math to determine whether a longer-term loan makes more sense than a shorter-term loan depending on their costs.
Small business financing can be exorbitantly complex. That’s where McManamon & Co. comes in. We offer a host of consulting services for small to mid-size businesses, including assisting startups with preparing Small Business Administration loan packages and helping companies find and evaluate financing options.
Are you ready to grow your small business, or planning to start one? Financing is a critical step and, when done the right way, ensures you have the funds you need without suffering a payment plan that will hinder your growth down. Give us a call at 440.892.8900, or get in touch with online and let us help you determine what financing plan may be right for your business.
Tags: McManamon & Co., small business, small business financing, small business financing tips | Posted in Financing, McManamon & Co., small business