Tips and Advice When You Apply for Funding
When you’re ready to apply for business financing, these are important things to keep in mind:
Put an Operational Structure in Place for Growth: When you receive funding, will you have the right people and processes in place to support an uptick in business? Lenders look favourably upon businesses who are actively planning for the “what ifs”.
Establish a Long-term Business Loan Roadmap: Experienced entrepreneurs who grow businesses very quickly understand when and how often to inject cash into their business. They know that additional funding creates and accelerates cash flow. If you look at your current business plans, forecasts, and projections, when might you need funding over the long term? How much might you need based on your growth goals? Do some initial thinking and your ideas down on paper. You could also network with business leaders in your area or turn to an intermediary to learn from them. These are a few easy steps to take to build a business loan roadmap. Lenders will appreciate your long-term perspective.
Calculate the ROI of this particular business loan: All business decisions have a return on investment, and it’s important to look at the bigger picture, not just one variable in isolation. For example, every loan product will have an interest rate. There’s a cost of capital and it’s changing all the time. For example, if you take a loan out of $1,000,000 your interest rate could be 9%, 12%, 17%, or even higher. The interest rate is just one variable. Different lenders will have different payback periods, too. What if you got a better interest rate but had to pay the loan back more quickly – even these factors are in isolation before you know what the loan enables you to do. To determine whether you should take a business loan, ask yourself:
- “Can I operate and grow my business without taking this loan?”
- “Can I fund part or all of this loan myself?”
- “Can I pay the lender back in this amount of time?”
- “How much more money can I make if I take this loan?”
If you apply for a loan and the interest rates seem astronomical, or if lenders won’t give you the amount of money you need, take a step back and layer in what the loan will enable you to do. Also ask yourself if you can get the same amount of funding from another source, or even several sources. Or it’s possible that getting money will be difficult for you right now. Something about your business is probably raising red flags. It could be the structure of your business, your pricing, or the way your financials are presented. Figure out what it is, get help to fix these issues, and then reapply for funding.
Build Relationships with Lenders: Don’t think of your lender as a “one and done” solution. If you are focused on growing your business, you may need money down the road, beyond this first investment. In a year or two or three, you could hit a period of extreme growth, or you might have trouble covering payroll and expenses. Keep in touch with your lender and treat them like a true partner. Update them as your business evolves and grows. That way it will be more efficient to secure financing when you need it because you’ll be a known entity. Your lender will be familiar with your financials and how you run your company. It’s also a good idea to network with lending professionals in your city or region so you can call on them in the future if needed.
Find an Intermediary: Experienced professionals can help you navigate the process of securing a loan, so you can get the right kind of funding for your business in less time. These service providers have relationships with hundreds of lenders, including many in niche industries. For example, Win Enterprises (link to https://winenterprisesllc.com/business-financing/ ) can help you get creative to find the best financing for your particular business. We can help business leaders and business owners obtain loans between $500,000 – $100,000,000 from lenders in the US and Canada, and by using our unique process and technology we might get you a “yes” when other lenders already told you “no”.
If you’re a small business or a middle market company that’s considering business financing and business loans, remember to take a step back and get your business plans and financials in order before you fill out applications, and ask critical questions. Also know that there are a myriad of creative financing options and strategies available to you, beyond traditional bank loans. If it would be helpful to work with an advisor who can create a strategy and guide you through the funding process, reach out to us and set up a complementary consultation here: https://go.oncehub.com/Consultation30