Entrepreneurs starting up businesses typically seek financing options. However, many of them are unaware of the risks involved in making unwise funding decisions. Here are some of the most common mistakes to avoid when you are looking for business financing.
Limiting Your Search
When you are searching for the right business financing, it is a mistake to approach only one lender. Instead, you should compare what a number of lenders have to offer so that you can find the terms that best suit the needs of your company.
Approaching the Wrong Lenders
Most lenders have specific criteria concerning the businesses they are willing to work with. Approaching lenders that are the wrong fit for your company will only waste your time and cause frustration.
Not Sufficiently Vetting Lenders
Of the many lenders that advertise their services, not all are reputable. Before you agree to work with a lender, you should investigate them. Look to the Better Business Bureau, the website of your Secretary of State, trade associations, and the website of the International Franchise Association for comments and complaints.
Lack of Preparation
Before offering you business financing, lenders want assurances that you will be able to pay them back. To prove that you can repay the loan, you need to provide a business plan that includes an explanation of your company’s income sources and a clear projection of future finances.
Lack of Patience
It is easy to become intensely frustrated when you are seeking business financing. Have patience, and project a timeline for funding that is realistic and achievable.
Not Realizing the Risks
Failure to repay a loan means the loss of any collateral you have put up, which may even include your home. Before you take on the responsibility of business financing in the form of a loan, be sure you are confident that your company is running well and that you can meet your obligation to repay.