Financing a business through the thick and thin of the economy is not always an easy task, and especially, if you are a small business owner. It may be during the initial set-up stage or a few years down the line due to a financial crunch when you look for short term financing options. Even today as the Coronavirus crisis is rising, owners of SMEs are worried about how much it will affect their cash flows.
So, at such demanding times, the first solution that comes to your mind might be short-term small business loans. Well, this is not an unusual option to consider. After all, having sufficient funds to move towards the business goals is not a bad idea.
Things to Consider Before Applying for a Small Business Loan
However, getting approval for such loans and repaying them on time may result in unwanted difficulties because of certain mistakes. Let’s take a look at these mistakes and their easy solutions:
1. Not Applying on Time
Many people tend to apply for the loan only once it is too late, and this makes them look desperate. So, rather than waiting for the final hour, it is advised to start planning your loan application right when you think that the need might arise in the future. This gives you more time to prepare, earns your application more credibility, and also gives you more time to build relationships with the key people in the institution.
2. Not Realising That Business Loans Have Specific Purposes
You cannot get a loan without vividly showing the reason why you need it. It is absolutely essential that your purpose for taking the loan matches with the loan type and the institution’s expectations. For instance, you cannot use an equipment loan to pay your employee’s wages or get a working capital loan to buy new equipment.
3. Not Having a Solid Business Plan
The institution that gives a loan will ultimately be interested in the likelihood of you returning their investment. So, your credibility counts, and this credibility comes from your vision of the future. You need to demonstrate a clear cut plan for the future, your future goals, and mission statements. A strategically strong is definitely helpful in convincing a lender of your capacities.
4. Not Reading the Fine Print
Loan agreements often come with lengthy contracts with a lot of fine prints. While it’s time-consuming to go through all the details yourself, it is not advisable to simply let the lender give you a gist about it. By doing so, you may miss out on some crucial fees, charges, and confusing interest rates. So, get in touch with a financial expert and let them explain the jargon to you.
5. No Clear Repayment Plan
Securing funds to help your business move forward is great, but one must always have a clear plan for repaying the loan. Spend the money on “right things” instead of buying fancy furniture and non-essential assets, and make sure your EMIs are always on time. Falling behind on your payments is a strict no-no as it will lower your credit score and hamper your chances of any financial support in the future.
A Safe & Easy Financing Solution
Another important factor is choosing the right lending institution and deciding on the right type of loan for your business. This is where our services come in handy. For expert guidance, an easy application process and quick loan disbursal, contact Gromor Finance today!