One of the toughest challenges for any struggling business is to secure funding to smoothly run their operations and steer out of the crisis. Although it requires a lot of hard work and research to prepare a case for funding your business but success is never guaranteed. Below we will discuss some very common mistakes that can be avoided while approaching lenders to get financing for your business.
- Proper Business Plan
This is the one of the major and most pivotal part to get business funding. In fact, this is the backbone of your proposal. Approaching for funding without a proper business plan is like going to war without any weapons and you can imagine the consequences of such a scenario. So, it is advisable to complete your homework for preparing an efficient business plan as you will be judged as per the contents and projections of this plan. You need to be realistic with your forecasted figures, goals and strategy and discuss with the lenders with a pragmatic approach to get the desired results.
- Financial Statement
Financial statements are an integral part of any business. Any business is judged by its profit and loss statement and balance sheet. It is imperative that you must submit your current as well as forecasted financial statements and also elaborate how you will achieve those forecasted figures. This will show how well you have prepared a funding case for your business. After all, numbers speak louder than words. So, if you put well thought-out business figures in your plan, you will not have to explain it to everyone.
- Funding Required
This is the most common mistake made by mostof the business funding seekers. Their estimate about the funding required falls well short of what is actually needed. This situation may arise due to a lack of homework, lack of knowledge about business model and oversight of cost associated with the funding or loans.
- Weak Market Research
Lack of market research or weak market research is another common mistake made by the funds seekers. You need to put an extra effort in doing your market research which should be relevant to your business and support your case of acquiring the much-needed financial injection.
- Partner in the Business
As it is said that 1+1 is 11, so you also need to follow the same path. It is better to have a partner in your business which also has financial interest in the equation. The team can make it easier to achieve goals and fulfill commitments made with the investors.
- Delay in Hiring
When everything is ready and you are clear with your goals, it is important to start hiring and do not delay your operations. Having the right team at the right time is important in every business. It is advised to identify your candidates in order to hire them as soon as you are in a position to pay their salaries. A delay in hiring the right candidates will cause deeper damages to your business.
- Type of Financing
The type of needed financing also plays a central role in the eventual growth of your business. If you want to keep decision making in your hands, it will be a suicide to go for equity financing. Any investors who will agree on equity financing, will try to keep important strategic decision making in their hands but will make you answerable for any failures in the business. You should be able to guard against such a situation in advance.
- Absence of Website
In this digital age, every business is now judged by their presence on the web. Websites are considered to be the first point of contact. An impressive website can increase your brand image and reputation and boost your chances of getting the required funding from the lender. On the other hand, the absence of a professional website can be detrimental for your loan application.
- Focus on Sales
Many business ideas fall on their heads because they don’t propose ways to invest in marketing or sales. Marketing and sales are the most important departments for any business to add to their bottom-line. It is important that you earmark a part of the funding for your marketing and sales departments to maximize your sales.
- Financing Taking Too Long
Getting fundingfor small business can be tough and sometimes time consuming. The prime example of such delays would be seasonal work where you need financing to store items in a season when prices are dropped. If you’re aware of such situations, you can always plan ahead of the time.
- Price of Your Product or Service
You need to keep the balance in your pricing to attract and retain the customers. It is imperative for any company to maintain a price range that is neither underpriced nor overpriced. Many a times companies are caught on the wrong foot with pricing that also dents their chances of obtaining a fiscal help from the lenders.
As humans we are all prone to committing mistakes. However, with little effort and research and prior homework, businesses can limit down their chances of finding them on the wrong side of the equation, especially when it comes to seeking business financing. The above-mentioned are some of the common mistakes that business come across during their funding process with the lenders. Avoiding such mistakes can always provide an impetus to your chances to get business funding which you can dedicate to further your business growth.