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The Do's and Don'ts of getting finance for your business

Guest post by: Helen Dowling

Article Overview: Let’s face it, if you want finance for your business, times are hard out there at the moment. Banks and other lenders are a lot more cautious about who they’re going to lend to…at the end of the day they want to be paid back! So bearing that in mind, here are my top do’s and don’ts for getting finance for your business.

The Do's and Don'ts of getting finance for your business

Let’s face it, if you want finance for your business, times are hard out there at the moment. Banks and other lenders are a lot more cautious about who they’re going to lend to…at the end of the day they want to be paid back! So bearing that in mind, here are my top do’s and don’ts for getting finance for your business.

DO….WRITE A BUSINESS PLAN
You’re not going to get very far without doing this tip. Lenders will want to see that you’ve thought everything through. They may also come back with questions, comments and concerns about your plan – don’t expect that the first time you hand it in will be your last. But as long as you’re patient and are prepared not to give up, you should eventually get what you’re looking for.

DON’T…THINK IMMEDIATELY ABOUT A BUSINESS ANGEL
How many times recently, have I heard people saying they’d like to get money from an investor or business angel? There are other options you know. And if you’re looking for less than £100K, you might be better off going to see what a bank can do for you.

DO….SHOP AROUND
These days, shopping around is more important than ever. Visit all the lenders you can think of and see what they can offer you. Don’t be tempted to go with the first lender who offers you money – make sure that it’s the right deal for you.

DON’T…GIVE UP
Lenders want to see that your business idea is viable and want you to be realistic about being able to pay the loan back. Bearing this in mind, it is highly likely that they’ll come back to you asking for some more information. Don’t take this personally – they’re just trying to reassure themselves that you’re a good risk. Give them the information they’re looking for without getting stressed and don’t give up until they say no for the final time. I recently worked with a client on his business plan and it took 7 attempts to get the funding he needed. He was ready to give up, but we hung on and got the money.

DO…HAVE SOME PATIENCE
Your loan is NOT going to be sorted out next week. In this current climate it is taking between 1 month and 6 months to get the money you need so plan your business around this.

DON’T…BE UNREALISTIC
Time and time again I hear people say “I’d like to borrow £x” and when I ask them what the money is for, often they’re unable to tell me. Make sure you know exactly what you’re borrowing the money for and be realistic about this. There is no point wanting to borrow £20K and only being able to spend £5K. Would you lend me the money if I told you that? No – and neither will lenders.

If you found this article useful, you might also be interested in the other guides we’ve got:
• How to get the money you need to start your business
• How to pitch successfully and wow investors

If you’d like more information about either of these guides which take you step by step through getting the money you need, please feel free to contact me using the information in my profile.

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Article Tags: attempts, banks, business angel, business idea, business plan, business times, investor, lenders, money, patience, risk, shopping



Related Forum Posts
Proper planning to get investors - Investment is very easy to get once you have the complete idea show it to the local finance company, they can get you investors with a basic fee, since they know your business and status etc, also local presence of finance firm will help investors feel easy to check on growth of you business. It will be difficult to get direct investors for your business without proper planning and reports.
Finance is the basic requirement - Without finance no one is going to stand next to you, your employees join your company looking at your financial situation and growth, if you don't have enough finance then better do a job.
Using your home for collateral is one thing, but... - Putting up your home for collateral is one thing, but utilizing the equity in it to finance a business is a whole other ball game and could be damaging in the long run. Do you know that if you completely finance your business with home equity instead of a busienss loan you will not be able to obtain a working capital loan later down the road? should you run into some financial troubles or wish to expand or remodel with working capital loan, you won't be able to get it if you finaced by personal means. It's always best to build a track record with a lender for future use and it's always better to be in business debt rather than personal debt. I always say: "You wouldn't hire a Plumber to do the Electrical in your home, so why would you finance a business using your home equity? Equity loans are for your home, business loans are for your business. You may however, utilize some of the equity in your home for loan down payment (depending upon your qualifications) and we can help determine whether that would be more helpful or damaging to your loan by pre-qualifying you for free. when using your home for collateral, it doesn't necessarily mean you will lose your home (in the event you cannot pay your loan payments). Lenders are always willing to work with you once you have a loan with them and they have already taken on the risk. they typically only utilize what they lien if nothing else can be resoloved (so it's basically a last resort) to go after what they lien.
Getting financed - It has always been my experience that it will always be better to be in business debt rather than personal debt, but I suppose when you can run your business out of your home and have so little overhead, it could be better to simply finance yourself and secure a business line of credit just in case you need it. On the flip side, when it comes to businesses outside the home, you want to secure financing and SBA is probably the way to go (depending upon what your total project will cost). Banks that provide SBA loan products prefer the loan be 100K or more. Then there are Micro Loans (loans that go up to 35K) and Signature Loans that are unsecured loans and mainly based on your credit score (680 or higher), they can finance anything in between and then some. It's been said in some of my other posts that when you obtain business loans its beneficial because you are building a track record with a lender for future use. Should you get financed via a business loan and later you need additional working capital to keep your business going (or to expand) the lender is going to be more apt to help you because they have already taken on the risk of your loan. Now, they would prefer you better yourself whether it be expansion or to pull yourself out of a hole so you do not default on the 1st loan... and if that means helping you further, believe me they will do it. However, if you finance yourself, who's going to help you with additional working capital if you run into trouble? Lenders won't help you because you financed yourself...they tend to take on the attitude that you didnt need them before, so why now? What if you had originally financed yourslef with home equity and still haven't paid it back...now you have a first mortgage a second or Home Equity line of Credit and your business is in touble and you have no way out.
Re: How Are You Financing Your Company? - I finance my business almost entirely out of profits from my business. But I typically don't have a lot of business expenses. Mainly just domains, hosting, a few membership sites, and some other things here and there. On the rare occasions when I need more I tend to use partnerships whenever possible or I get out the credit card.


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