Engagement Isn’t the Goal. Connection Is
Borrowing money for your start-up can often feel daunting, but the more prepared you can be the greater chance you have of securing a loan.
Knowing and being able to communicate the basics of your business will inform the lender about your business proposal so it can assess your application as favourably as possible. Here’s 4 tips for borrowing for a start-up business.
1. Know your numbers. In order to inspire confidence in you as a borrower, it’s important you are familiar with your key financial figures, even if you don’t prepare your own financial statements. This includes income, net profit and expenditure.
Prepare a 12-month cash flow forecast to demonstrate you have considered all aspects of a full year in business, and how much profit you reasonably expect to make.
2. Estimate how much funding you need. Are you looking for funds to help with cash flow and operations on a regular basis, with a larger overdraft limit for occasional use? Or do you need one-off funds to open a new branch or purchase additional equipment?
Know what you need to borrow, and be able to demonstrate the positive impact it will have on your business.
3.Consider loan security. Banks will, generally speaking, offer a cheaper interest rate if security is offered for the loan.
Preferably they like to secure loans to property assets, however sometimes plant and equipment can be used as security too. Consider what security you can offer the bank to increase your chances of a loan approval.
4. Ask questions. Your finance broker will shop around on your behalf to find out what products are on offer. If you’re already a customer with one lender, discounts may be available. If one option is much cheaper, your finance broker will be able to tell you whether it carries higher fees or a likelihood of the interest rate changing.
Developing a clear understanding of your position and where you want to get to is vital for any business and especially a start-up. Talk to us today for guidance on obtaining finance for your business. There is no ‘one size fits all’ approach to finance, have someone in your corner who understands your business, and has your interests at heart – this is the Finestream difference.
