One of the biggest dilemmas an entrepreneur must face when starting their own business is determining exactly how they are going to acquire the funds needed for the job. Given the intense competition of the modern market place, it is a challenging task to attract lenders who are willing to facilitate your financial requirements at sizes and rates you are comfortable with. By making tradeoffs between various methods of capital acquisition you will be able to ease the pressure, without getting into too much debt or trouble. In this article we will be looking at four such smart tips that will help you obtain the loan that is most suited to your requirement.
Determine the exact amount you need
To determine the amount of funds that your business will require, you must first develop an accurate business plan along with a budget. These are always requested by financial intermediaries such as banks and machinery finance provider and based on the viability of the business and its vision, they will decide whether or not to facilitate your need. However, if according to the business plan, you feel unwise to go through the trouble of involving a commercial finance broker because there is a possibility of fulfilling your requirement with your personal funds or even that of friends and family, it’s always better to go with this option so that you will not have the burden of debt dragging you down in the future, if things don’t go as planned.
Determine the purpose
By identifying the specific business purposes for which you need lender’s funds, you will be able to find the most suitable lender form the financial market in order to receive better rates, payback periods and flexibility that will allow for better financial stability. For instance, if you require capital for construction purposes, look for a lender who specializes in that area, so that they will give you a better service.
Availability of collateral
Traditional lenders prefer an initial collateral payment to mitigate the level of risk they are exposed to when lending money to a business. Therefore, it is always advisable to possess some inventory or property that can be placed in the hands of the lender as collateral. However, if you don’t have any assets of such nature, you will most likely not be considered for the loan. In such cases, you can offer future sales, accounts receivable or even a part/ percentage of the company in exchange for the loan.