Every new business can do with external financing. There are several ways to ensure you get the required funding for your small business.
However, it is widely known that small businesses find it much harder to secure a financial loan than large, well-established businesses. This, however, does not mean that you cannot secure financing for your small business. It just means that you will have to take the right steps to ensure you secure the loan you require for your business.
Here are some tips that will help you secure a financial loan for your small business:
Invest in professional liability insurance
Before a financial institution or a lender loans out money to you, they would want to ensure that you are a serious business owner. They would also want to ensure that you have proper insurance taken against your business and yourself. Professional liability insurance is one of the essential types of insurance available today for small business owners who provides professional advice and services.
The insurance can be taken out to protect a business, its owner, as well as its employees. It can be used when customers file a lawsuit against you or your business for negligence, unsatisfactory products or services provided by you, and even for misunderstandings concerning what you promised to deliver. You may also want to consider collection insurance.
Lawsuits will lead to the requirement of lawyers and different types of fees associated with it. Professional liability insurance will cover all costs associated with a lawsuit, including your lawyer’s fees, settlement fees, and fees associated with judgment.
Create a professional business plan
All types of investors will require detailed information regarding your business. From what your business sells to its objectives, aims, marketing strategy, finances, and more – everything is of interest to potential investors. A professional business plan will have all this information recorded in an easy-to-understand format.
Investors will go through every detail of your business plan to ensure you are not a fly-by-night business. The plan will also list out partnerships, other investors, and information of other people who are involved in the business. Business advisors and accountants like Cooper Parry accountants could be a good option.
Ensure that your business plan also includes details of the investment you are looking for.
- Why you need the money
- What the money will be used for
- A thorough budget of how each part of the loan will be spent
- The partners and suppliers you will be working with
Understand the different types of loans that are available
As a small business owner looking for a loan, you have several small business loan options. The better informed you are of these options, the more chances of finding the type of loan you need. Every business is unique, and every business loan is taken out for a unique requirement. You must also take into consideration the interest, the types of loans, how long you will have to pay back the loan, and what different types of loans will cover. Here are some options for you to consider:
- Term loans – Lump sums that you must pay back with interest over an agreed period of time.
- Short-term loans – Term loans that must be paid back quickly.
- SBA loans – Flexible term loans endorsed by the administration for small businesses.
- Long-term loans – Large loans that need to be paid back over a long period and with low-interest rates.
- Alternative financing – Includes crowdfunding, family loans, peer-to-peer loans, and cash advances.
Follow up promptly and thoroughly
After your initial meeting with investors, they may contact you for additional information. Provide all the required information on time. Don’t put this away for a later date. The quicker you provide them with the information they require, the more chances of getting the loan. This is because you will come across as a serious and prompt business person. Also, ensure that you don’t hide any negative information that might hinder your chances of getting a loan. Instead, provide the information, but also explain the situation to them as well as the steps you took to or will take to rectify the problem.
The more honest you are about your situation, the better your chances of securing financing for your small business.
When going about securing finance for your small business, remember that you need to be persistent. However, if you fail to secure a loan even with persistence, talk to financiers and find out why your application for a loan was rejected in the first place. If there is a problem that can be fixed, for example, if there is something wrong with your business model, make the necessary changes, and try again.
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