Securing financing can be a game-changer for your company, but it comes with its own set of challenges. Over the years, I’ve learned that the faster you get your money, the more it tends to cost. You might get a loan today and end up paying $1,600 a week until it’s paid off. That’s expensive money. But don’t be afraid of debt—use it wisely.
Below are the eight essential steps I follow when pursuing financing:
1. Understand the Cost of Quick Money
Fast money usually comes at a steep price. Recognize that the speed of obtaining funds is directly related to the cost, and make sure you’re comfortable with the repayment terms before moving forward.
2. Keep Clean Financials
Before you approach any lender, ensure your financial records are in impeccable order. Clean financials are the foundation for any financing discussion.
3. Develop Practical Projections
Based on your historical data, create projections that are realistic. They don’t have to be overly complex, but they must be practical and reflect your business’s actual performance.
4. Assess Your Personal Net Worth
Lenders often require your personal net worth, which is essentially your balance sheet. List everything you own and all your debts. The difference between the two—your equity—is crucial for securing financing.
5. Work with a Business Lending Broker
I personally prefer working with a broker. A good business lending broker offers more options than what you might get at a bank or credit union. With a broker, you’re not left to the whims of a loan officer at a particular branch.
6. Explore a Line of Credit
If you own a home, a Home Equity Line of Credit (HELOC) is one of the quickest and least expensive financing methods. It’s a smart first step to consider.
7. Use Credit Cards Responsibly
Credit cards are easy to acquire, but they come with high interest rates that can bump up your monthly payments. Use them sparingly and ensure you can manage the cash flow implications.
8. Consider SBA Loans or Other Business Loans
Once you’ve exhausted the easier options, the next step is to look into SBA loans or other types of business loans. These can offer favorable terms if you meet the requirements.
By following these steps, I’ve been able to secure the financing needed to grow my business while keeping costs manageable. Remember, being prepared is key—make sure your financials, projections, and net worth are all in order before you take the plunge into financing.
Need help securing financing for your business? Book a meeting with Foundation Accounting & Consulting today!