Guide to Securing Financing for Your Small Business
Finding commercial lenders in an economic environment can be challenging, and when you do find them, they could come across as conservative. But the good news is that it’s not impossible to secure financing for your small business. Follow these three tips to better your chances of obtaining financial help.
Provide a realistic and detailed business plan
Commercial lenders need to know that you take your business seriously. A detailed business plan with an overview of your business, your vision, what you plan to sell, your target clients, and key selling points must all be included in the business plan. Financiers also want to make sure you know your market and have the expertise to execute your plan.
Proof of professional liability insurance will show potential financiers that you have taken serious measures to protect yourself and your business from claims that might arise. Professional liability insurance is a type of insurance that covers businesses from claims and lawsuits against the business for negligence, mistakes, and undelivered services. This insurance covers attorney fees, costs and fees related to settlements, and costs and fees related to judgment. For more information on professional liability insurance, click here.
Know what you need
Thoroughly understand how much money you are going to need. Commercial lenders would, but naturally, want to know how their money is going to be used. They need assurance that their money will not be spent on nefarious activities.
Explain in detail how much money you would like to borrow, how you intend to spend the money, and for what length of time you would need the fund. Also, explain in detail how you intend to pay back this money.
Provide details on your current business situation
If you already have your small business up and running, provide a report with KPIs (key performance indicators) from your business plan. Detail out where you have been successful in executing your plan. Present accurate financial information that is up-to-date and includes a balance sheet, statement of income, and receivable and payable accounts. To ensure these details are presented in a professional manner, get your accountant to prepare the statements for the presentation.
You should also be in a position to discuss your financial position in detail with the potential lender. Ensure that you are also up to date on government remittances.
Finally, don’t be discouraged if your request for funding for your small business is rejected. Instead, find out why it was rejected and work on areas of concern.