What you should know about small business financing
If you are a small business owner then it is crucial to know what the options are for financing and what will be right for your small business. There are several different factors that will affect if you are able to secure financing for your small business. Small business owners who understand what these are will be far more able to obtain the financing that they need for their business. Small business owners should not be discouraged by the lack of options when it comes to traditional lending but rather be willing to work hard, plan, and be creative when it comes to getting the financing that their business needs. Here is what you should know about small business financing-
• It will start with you-Many business owners are surprised to learn that a potential lender will want to see how much they have invested in their small business. Keep in mind that a lender will judge your confidence in your small business by how much you are willing to risk. You should take a close look at your personal finances and make sure that you have money that you can invest toward the small business financing that you will need.
• Don’t be afraid to network-Many small business owners overlook networking as a way to raise financing for their company. However, these simple interactions that you can have with others can provide you with many different financing opportunities. Small business owners should always have a business card or other visual reminder that they can leave with a potential investor. Finally, even if the person you are talking to isn’t interested in financing your small business always ask to determine if they might know of someone who would be.
• Have a great business plan-Small business owners often think that because their business is small they don’t need a business plan. This is always a mistake. The reality is that you need a business plan no matter how big your business is or will grow to. Whether you are approaching a lender or an investor for small business financing they will want to know that you know your business, your market, and your customers through your business plan. Having a well researched and well written business plan is crucial for obtaining small business financing.
• Consider less traditional options-Small business owners often make the mistake of thinking that the only way to get financing is through a traditional lender. This is not necessarily true. The reality is that if you are willing to be creative and do some research there are many other options for obtaining small business financing. Some of these options include but are not limited to:
1. Using credit cards-Many small businesses have been built by using credit cards. However, business owners should be aware that they will pay a much higher interest rate then traditional lending.
2. Family and friends-Many small business owners approach family and friends for financing. However, you will need to make it clear whether you are asking for a loan or an investment. While you would be responsible for repaying a loan an investment would not have to be repaid should your small business fail.
3. Invoice factoring-For small businesses that are already in existence this can be an option for financing. Keep in mind that depending on the company that you go with you will have to pay a portion of the money that is recovered. This makes it essential that you take the time to shop around for the best deal possible from any invoice factoring company that you are considering hiring.
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