The way that you go about financing your business may vary depending upon a number of factors:
- The stage of evolution your business is at;
- Your past trading history;
- The purpose you need the funding for;
- How much you are planning to borrow and how that is measured against your overall financial worth and that of your business; etc.
Let’s have a look at each of those in due course.
The stage your business is at
Companies that are still in the early stages of setup or with a very limited trading history may have special challenges in terms of finding business launch funds.
Typically lenders may wish to see that you are investing a relatively meaningful amount of your own finances into your enterprise (e.g. through re-mortgaging) thereby effectively sharing the risk with them.
Lenders in this category are often the new business section of the banks, some finance houses, business angels and very possibly some of the specialist venture capitalist companies. It is also not unusual to see new businesses drawing upon family finances from relatives, where such a thing exists.
Your past trading history
Businesses that have two or more years of trading and accounts behind them may be able to look more widely around in the marketplace for various forms of business loan.
Companies such as everline.com may have a role to play in helping here.
Once you do have a trading history behind you, you may find it easier also to borrow larger sums – particularly if they are linked to things such as capital acquisitions or business expansion.
The purpose you need the funding for
Some potential lenders here may be rather more focused on understanding the minutiae of your requirement than others.
The banks in particular may prefer longer-term lending and for what might be termed routine purposes, as opposed to short-term loans needed to cope with a given situation.
Many lenders may prefer to see loan requests that are being driven by strategic thinking rather than crisis management. Most will wish to be sure that you are clear that you will be able to afford the repayments within whatever terms and conditions you have agreed.
How much you are planning to borrow
As you might imagine, trying to obtain business funding that appears to be out of any proportion to the size, scale and profitability of your enterprise, may be something of a challenge for many if not all lenders.
Some might offer flexible loans of up to £50,000 over 52 weeks with the option to repay it early and thereby save on interest payments though others may insist upon what are called fixed term arrangements.
Making your case
Whatever your individual circumstances and however they may influence your choice of potential lender, in almost every situation it is imperative to be seen to be someone that is professional and clear as to why the money is required and what purpose it will be put to.
Little is more discouraging to potential lenders than a business loan proposition without a supporting rationale. Be certain that you have a clear, well-articulated and thought-through loan request – particularly if it is for anything other than a relatively small sum of money.
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