6 Tips on Small Business Finance

6-Tips-on-Small-Business-Finance

An organisation’s access to capital can be the difference between success and failure. You have to be clear about what you need the finance for and the type of finance you are looking for. Read on for 6 Tips on Small Business Finance:


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If you are trying to expand your business and need extra capital, here are some tips that might be helpful in securing finance for your organisation.

1. Personal Investment is Key

You cannot hope to risk someone else’s investment, without risking your personal capital in the business. A finance partner will not show much interest unless they make sure that you have invested a significant amount of capital in the business.

Nevertheless, it is almost impossible to get debt financing for a startup unless a valuable personal asset is kept as collateral. Try to maximise the amount of personal money invested in the business to stand a better chance of approval.

2. Be Specific About The Why and The Type of Finance You’re Looking For

Because there are obviously different types of finance available, you should be clear about the type of finance you require. You want to have a clear objective for the purpose of the finance. 

Whether it is working capital finance or finance to buy new equipment, business owners must have a precise idea about the why and also the amount of capital that is required.

They also need to understand fully how the type of finance they opt for is going to work. What are the repayments? What's the timescale? What's the total cost of the finance?


Recommended reading: How To Finance Your Startup


3. Crowdfunding

One of the most popular ways to raise capital in a short timescale is through crowdfunding. Although now we think of crowdfunding as something done online, it can also be through your social contacts like family and friends.

Although, this is more of a short-term solution to your capital needs, it can definitely work when nothing else does. Sites like Kickstarter and Indiegogo can be a way to raise some short term capital for projects and product launches.

4. Microloans

Even after you have invested a significant amount of capital, there might be a chance that financers might still not provide you with the capital you need. This might be due to the lack of any credit history and any prior experience.

The best way to get an easy cash advance is by applying for a microloan. This is specifically for small businesses that need some additional working capital for their day to day expenses. The minimum amount for a microloan can be as low as €500. 

In addition, many microloan organisations have flexible and lenient criteria, and don’t require as much documentation or a long process.


Recommended reading: What Do You Need for a Business Loan? Here Are The 6 C's


5. Clean Credit Record

It is already clear that investing in a new business is a risky affair for most financers and you do not want to ruin your chances by having a bad credit history. Most finance companies do a thorough background check on most investors and also check their credit scores.

If the investors find too many discrepancies in your credit history and a low credit score, there are slim chances that they might invest in you. Keeping a good check on your credit scores and settling all the payments that might affect your history is always a good thing before seeking an investor.

6. Long-Term Planning

While there are countless ways of securing small finance, planning for long-term business is the key to success. Investors will often look at the longevity of your business plan. Hence, showing you have worked out the amount of capital needed based on your long term plans is always the best option.

Apart from these, there are several other ways like using your credit card and applying for a bank loan to get easy finance for your small business. And remember, it is always careful planning and limiting your expenses that will really help secure that additional capital for your business no matter what finance option you end up using.

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