When you run a business, you will need to be thinking of many different things. In fact, a business owner quite often has to think about every single aspect of their business, particularly at the very start before they can afford to take on additional managers and staff or to outsource some of the work where necessary.
One of the most important things to think about is finances. Most business will need to borrow money at some point, whether it is to get started altogether or to grow at a later stage. This is perfectly normal, and even expected, which is why there are a number of different options for business owners to consider when looking to borrow money. Read on to find out more about how to get started.
How Much Do You Need?
The very first thing that will need to be done when you are thinking of borrowing money for your business is to determine just how much you are going to need. This shouldn’t be a guess (unless it is an educated one with plenty of evidence to back it up), and you will need to take your time over getting the figure right.
No matter where you are hoping to obtain your borrowing from, the lender will want to know that the money they offer will be well spent. They will want to be sure that they will be paid back, including interest. If the money is borrowed for a vague reason or just a sum that is picked out of the air, then lenders might be concerned that you will not spend it wisely, and they will be reluctant to lend.
Not only that but borrowing the correct amount will help you and your business. If you don’t borrow enough, you will need to go to the lender again and ask for more, and you may be denied leaving you partway through a project with no hope of completing it. If you borrow too much, you will find that you are paying more on your monthly repayments (and you’ll be paying back more overall) than you would have otherwise done, and this can have an impact on your cash flow.
Which Type Of Borrowing?
Once you know how much you need to borrow and you can show potential lenders why you need the money (writing this information in a business plan can often help), you can then approach the correct organizations. There are a number of different options that might be available to you, depending on how much you need and what your credit score is like.
You could, for example, go to a bank or other financial institute, and apply for a business loan. This is probably the most obvious means of obtaining finance, but because banks have strict lending criteria, it may not be possible to get the money you need in this way. Another option is to look for angel investors. An angel investor is an individual or business that invests in other businesses and earns a return on their initial investment. They might also be able to help with networking and other useful business growth ideas, although this is not always the case and sometimes they will only want to invest and let you handle the rest.
Alternatively, you could obtain a personal loan and, in turn, loan that to your business. Set this up in the right way, and you might even earn a return on your investment. Make sure, however, that the business will be able to sustain the repayments. Otherwise, you will be personally liable. If this idea appeals, this helpful website will give you more information.
If you can’t borrow money or would prefer not to, crowdfunding might work well for you. Create an exciting campaign and people who are interested will invest money into your business.
Read The Terms
No matter which type of funding you choose, and which is going to be best for your business, there will be terms and conditions for it. These will talk about how much time you have to pay the money back, how the interest rates are calculated and applied, what the penalties are for mixed payments, late payments, or even early payments in some cases. Even though these might be a rather dry read, you will need to go through them carefully. It might be that you aren’t getting what you thought you were, and therefore you will need to negotiate or, if that is not an option, look elsewhere for funding. Signing up to conditions that you don’t agree with is not a good idea and can even damage your business.
If you can’t make out what the fine print really means, you should engage an expert to read it for you and explain the details. Although this might take additional time and put your project back a little way, it is worth the slight inconvenience if it means you completely understand the terms and conditions of the loan or borrowing you are signing up for.
Be In Control
As the business owner, you are ultimately responsible for overseeing how the money you borrow is used. It doesn’t matter how much you borrow, what you need it for, or where it comes from (even if it is multiple sources) – you must keep control of it. Work to your budget and ensure that you know where every penny is being spent. If you don’t, you can easily miss something important, or overspend and not have enough cash left to complete the task. This will have a major impact on your business in general and will cause repayment problems too.
You will also need to be aware of your repayment schedule. When are you expected to make the first payment? How is it to be paid? How much will it be? This needs to be added to your financials for the business so that you can be sure that you don’t miss any repayments and cause penalties to be added to your loan.