Funding your business can be quite a task and when you add finance into the equation, you may end up with more questions than answers. You may have a firm grip on your personal finances, and have previously used funding like credit cards or payday loans, but when it comes to your business there is a lot more to take into account. So, keep reading to find out what you should avoid when searching for business funding.
Not Browsing All Your Options
You may think that business funding only comes in the form of a loan that you repay monthly. However, there are so many different options available for businesses and you’d be best to explore them all before making your decision. There are business loans from banks and online lenders available. Banks tend to have a longer turnaround and stricter criteria when processing an application. Whereas online lenders may have a quicker application process and consider you even with a low credit score. There are also other means such as credit cards and overdrafts which can work effectively when used right. Some business overdrafts will allow higher limits and flexible payment methods, so it’s always best to consider every option you could choose from.
Over Or Underestimating
A common mistake people make when looking for business financing is over or underestimating how much they need. If you overestimate how much you actually need, this could mean your application for funding is rejected because the amount is too high. But, if you’d put a realistic figure, you might have been approved as it would be in line with your affordability. Another thing to avoid is underestimating how much finance you need. This can cause you to end up needing finance again further down the line as you didn’t request enough in the first place. The best thing to do is ensure your finance will cover the plans you have for it, no more no less.
Not Doing Your Research
Applying for finance can be an exciting time as it means you’ll be able to invest it all into your business and really get it off the ground. However, if you don’t do your research, you may end up with a lender with less than favourable terms. This can range from high interest rates to terrible customer service. When selecting a lender, you want the whole package, not just the finance itself.
Lack Of Planning
When you begin searching for business funding, make sure you have a clear plan of what you’re going to be using it for. Not only will this make filling out application forms easier, but it will also allow you to request a realistic funding amount to borrow. The lender will want to see how you’ll spend the finance to boost your business, so without it they may not see you as a worthy investment. You don’t need to list down every penny, but a broad overview of how the finance will be spent will be beneficial.
You always want to avoid getting scammed, and unfortunately this does happen to people often. Some will pose as lenders and require you to pay a processing fee before they’ve even approved your application. They may claim it’s because you’ve got a low credit score or call it an admin fee, but no reputable lender would force you pay a fee for this. So, if you come across this while searching, you can report it to the Financial Conduct Authority.
Exploring the options available for business financing is the best way to ensure you find the finance that will work for your business. Funding your business can be the difference between success and failure so make sure you spend more than five minutes browsing a webpage before committing to a contractual agreement. Don’t be afraid to shop around and find the most suitable funding for you and your business.