Starting Your Own Business – How to Obtain Financing
Planning on starting your own business but don’t have the money? In this post I will share some of the options that are available for a small or medium sized business to obtain financing. However, before I begin, let’s look at some of the best – or most neccessary – reasons to obtain business financing. The main idea here is that you are want to spend money on a business opportunity that will provide more return than the cost of the debt you will obtain.
The first legitimate reason one would need to acquire financing is for new equipment for the business. If you don’t have the money to obtain the machinery or parts for a new profitable product, then borrowing the money to purchase the machinery or parts for your business is a reasonable reason to take on debt.
Image via Pixabay
A second reason to take on debt would be to purchase more inventory for your business. If you own a seasonal business and want to build up stock before a busy season, obtaining financing will allow you to purchase that needed inventory. Expanding a business location could be another necessary reason to take on debt, but only if the expansion in space will increase revenue such as in a restaurant or store. A good rule to follow when it comes to considering taking on a business loan is that if the items you purchase are not going to produce more profit than the cost of the debt incurred, then don’t do it.
Now to get to the main point of this post, how can your small or medium sized business obtain financing? Most small and medium sized businesses obtain financing through bank credit. This external debt is most often obtained from banks through loans, credit cards, and lines of credit. If your small or medium sized business needs financing, speaking with a bank to obtain these three methods of financing your business is going to be your best option.
To obtain business financing, you will first have to find a bank to obtain a loan. The banks will look to see if you have a business with a stable income and a good business need for the capital. They may also look at your personal credit score. In addition, many banks will want to see proof that you are capable of repaying the loans. One of the best ways to show this is by keeping detailed records. If your company isn’t being careful in its payroll and accounting, then it can lead to problems when it comes to applying for a loan. This may also show that you need to think about data protection officer services.
Need some help with record keeping? There are lots of companies that provide software to help you with all aspects of record keeping. For example, Clockspot.com offers timekeeping software. Using this timekeeping software will help you reduce the time spent creating payroll reports as well as keep track of your employees time. Xero is another software company that builds invoicing and bank reconciliation reports online.
Image via Pixabay
When looking for a business loan, make sure you take a look at different banks in order to get a better idea of what is possible. You should look not only in your local area but also nationally. Banks outside of your immediate area could be offering very agreeable terms. You can also do some research online to look around for the best deal.
Once you find a few banks that are willing to work with you, you need decide which loan is right for you. Make sure you look to see what interest rate will be charged, if there are any penalties associated with missing a deadline, whether the terms of the agreement are clear, and whether you think the bank and representatives will follow through with details of the agreement. Also, look into the agreement to see how flexible payment deadlines are and whether the timing of the payments will work for you.