Tips and Tricks for Small Business Financing
The world of small business can be exciting, stressful, and scary. You must be able to do everything and need to be able to do everything at once. There are often huge swings in your business. The trick as a small business owner is to be able to handle the ups and downs. This is possible with the right kind of small business financing.
As an entrepreneur, you know that having a great business idea is less than half the battle. How you get fast small business financing and create a thriving business is what separates dreamers and true business people. That’s just one helpful tip every small business owner needs to follow.
Some Tips and Tricks You Need to Know About Small Business Financing
Small businesses are those with less than $5 million in sales. As such, there are rules that apply to large businesses that simply do not apply to small businesses. One of those rules is that when a business wants money, they should go to a bank.
That rule just doesn’t apply for small businesses unless the owner has substantial property and capital to back up a business bank loan or small business line of credit. Banks only give money to a business if they know that the loan is 100 percent backed up with capital.
Most small businesses are self-financed by the business’s cash flow and by the owner plowing all his profits back into the business for account receivable financing. That type of financing is fine in the beginning. However, if the growth rate or loss rate of your business is higher than your net profit then it requires financing.
When the economy or your industry is doing well then often that is the time when a business owner doesn’t think about financing. But a good business owner should have financing in place always regardless of whether they use it or not. When you are desperate and you do need a line of credit or a business loan, that is when it’s difficult to get and it will be too late to get financing in place.
Unless you are a better economist than banks, Goldman Sacks or the federal government, then you will never be able to predict when the next recession or growth opportunity will come along. Business growth runs like a squirrel. It goes all over the place and no one can predict its course. Access to working capital helps smooth the ups and downs.
Tips and Tricks about Getting Financing from a Bank
The first tip you should be aware of is that a bank will want you to provide 100 percent collateral for any line of credit or short term business financing they give you. It is also important to note that if you are relying on using your accounts receivable as assets, no matter how much you have, it will never be enough.
A second tip is that all banks will want you to have a credit score of 680 or better. Without that, they won’t even give your application a passing glance.
Thirdly, a bank will lead you to believe that you will be approved. Then, after you fill out all paperwork and wait 2-3 months, you will receive a letter saying you are rejected for some ridiculous reason.
Most banks will charge closing costs, maintenance fees, and renewal fees so even if you don’t use your line you will be charged. Additionally, banks will require audited or reviewed financials from your accountant going forward, which will cost you more money.
You can apply to a bank for business financing but know that your chances of getting approved are slim to none.
All business owners who have applied for bank financing have war stories of being led on for months thinking they will be approved. This makes it especially devastating when they find out months later that they have actually been rejected for the small business loan. Your time is your most important resource and a bank will squander a lot of it.
Tips and Tricks about Alternative Lenders
Small businesses should look at alternative financing companies, like Financing Solutions (www.financingsolutionsnow.com), because these companies don’t use cash from the federal government but from private investors. Therefore, lending standards can be more lenient.
Alternative financing companies cater to small businesses and in most cases are cheaper than banks. They are also more flexible and work faster to get you the quick business funding every small business needs to succeed.
Financing Solutions will ask for bank statements and recent tax returns. We will also run a credit check. However, unlike banks, we will give you a decision in 48 hours or less.
Most small business owners nowadays just bypass the bank and go right to the alternative finance company because they don’t have time to waste. A Financing Solutions line of credit requires only a 630 or better credit score, costs nothing to set up, and takes about 24-48 hours to get in place.
Small Business Financing Tips and Tricks
1 Work to separate your personal finances from your small business financing.
When you first start your business, any small business financing or instant business loan you obtain ties directly to your personal credit score. After all, the bank has no other criteria to use since your business is still too new to have a history of its own. However, now that your business is up and running, it’s vital to building this history. Open an account with your business name and pay all bills from this account. This is how your business can build a reputation for paying bills consistently and on time.
2. Don’t forget to take care of yourself.
If you constantly worry about your own future and how to survive, you will lose focus on ways to improve. Take time to put the necessary systems in place to ensure your financial future. Set up a retirement fund, hire someone to manage your investments, and keep track of your credit score.
3. Use technology to your advantage.
Things like bill payment and payroll management programs can keep track of your finances and maybe even catch items that you miss. Business loans, business credit cards, business cash advances, and your own mortgage can be difficult to keep up with on your own. You can also set up alerts and stay on top of all your accounts. This will save you both time and money because you avoid late fees and better manage your credit score.
4. Get professional tax advice.
Now that you have a thriving business, tax issues are more complex and should not be in the hands of amateurs. You don’t want to get on the wrong side of the IRS. A quality tax professional will make sure you file all the proper forms and follow all the different taxation processes.
5. Stick to a budget.
It’s easy to chase the next big thing. Unfortunately, every time you do this, it costs money. Then you may constantly borrow from one area of your business to save another. This leads to a perpetual game of catch up and your business suffers. Look at your monthly expenses, including interest rate payments and credit card balances. You may need to consider other options such as debt consolidation or refinance loans.
6. Never forget about small business financing.
You may often face the temptation to let someone else handle your finances. While leaving financial matters in the hands of the experts is wise, that doesn’t mean you can sign off on all money issues altogether. Schedule regular meetings with your accountant and don’t leave until you fully understand every aspect of your finances. Some small business owners mistake sales for profits. You can’t count the money until the cash is in your hand. In addition, find ways to cut expenses.
7. Increase your cash flow.
When you don’t have cash, you can’t make payroll, handle daily expenses, or deal with emergencies. You might even have to close your business. It’s imperative to find ways to keep more cash in your hand. This includes enticing customers to pay sooner, negotiating with vendors for better terms, and managing inventory. You can also work to lower your interest rates and fees on quick business loans and business cash advances.
8. Always keep a rainy day fund.
If your business profits grow and thrive month after month, congratulations. However, most small businesses experience frequent fluctuations in customers and cash flow. This makes it crucial to always have a supply of money you can draw on to tide you over. Successful businesses keep working capital for this purpose. Therefore, you won’t have to take funds from one area of your business to supplement another.
You can also get an unsecured business line of credit to handle unexpected expenses or even out cash flow. The best place to go for one is Financing Solutions. They can give you the fast small business financing you need to grow your business. Most importantly, their help is quick, simple, and hassle-free. You owe it to your business and your own peace of mind to give them a call.