Unless you’re already rich or your company is producing insanely high profits, you’ll probably need to get funding to start or grow your small business. Often, this means applying for a small business loan, finding an investor, or seeking out a merchant cash advance. Loans are often the first thing that come to mind for most small business owners, so let’s dig into some things a small business has to know before applying for a loan or other type of funding.
Check Out Your Business Credit Score
First, make sure you know your business credit score. You can be certain that any bank or lender will look up your score when you go to apply for a loan. You can also be certain that many investors will be interested in your business credit score.
Have bad credit? That might make it difficult to secure an affordable bank loan. Don’t worry, however, there are other options besides traditional bank loans. A merchant cash advance is great for companies with bad business credit because you are selling a portion of your future credit card sales, rather than taking out a loan.
Make Sure You Have Documented and Understand Your Financial Situation
It doesn’t matter if you’re looking for a bank loan, investor, or merchant cash advance. If you want to apply for funding, your potential funder will want to have a deep understanding of your situation. This means that you need to have a deep understanding of your situation as well.
So your first step should be to collect and document your financial situation. How much in revenues are you bringing in? How much in profits? What are your liabilities? How about sales? You will have to get a complete picture.
Further, you will also have to gather all of the documentation. This can be a huge pain, but it is a necessary one. Banks, merchant cash advance firms, investors, they will all want to see proof of your situation. Make sure you start early as the process can take awhile to complete.
Consider Their Point of View
As you are preparing your loan or merchant cash advanced application, take a moment to step back and consider their point of view. If you were a lender or merchant cash advance provider, would you loan money to yourself? If so, why? What would you want know?
Lenders want to make money. They don’t necessarily want to rip you off, but they do want to assess the risks and make sure that it’s a good deal. By understanding their point of view, you can build a better case for your business. This can increase the chance of you obtaining funding from a merchant cash advance firm or traditional bank.