It’s near the end of 2017. You’ve been saving all year and interviewing for your team, and one of your New Year’s resolutions is clear: you’re going to start your small business in 2018. You’ve been dreaming about it for years, and now you’re almost ready. But, like most new business owners, you’re worried about financing. You’ve worked so hard and planned so thoroughly, but because of how high the startup costs are, you’re going to have to apply for a loan.
Any small-business owner knows that it can be a real challenge to apply for funding. Even after going through all the hurdles, the likelihood of rejection is high. In fact, according to a survey conducted by the NSBA, 27% of small businesses polled were not able to garner the funding they needed. Any company leader looking for funding will have to ensure they take the right first steps to secure that funding.
Ensure that the Reasons and Amount are Clear to the Lender
The very first step any small business owner needs to take is understanding the reason they need the loan, as well as the amount they need. In the case of starting a new business, calculating the loan amount can be quite tricky–after all, many of these calculations are going to be estimates, since you won’t have the direct experience with your business just yet.
Fortunately, however, there are some guides available online. For example, TheBalance.com has an article (which you can check out here) on how to create a business startup budget, which will help with these estimates.
Additionally, you will want to ensure that the existence of your business is essential–and that there are consumers in your area who need your product or service. After all, if there’s another restaurant in town serving the same kind of food as yours, you may want to consider changing your menu somewhat or setting up shop in a different part of the city.
Get the Right Help
Reaching out to a professional is always a good idea when applying for funding. After all, a professional will be able to take a look at your estimates and what you’re asking for, and decide if it seems reasonable. For example, if you’re applying for the Small Business Association (SBA) loan, use their website to find local assistance, including district and regional offices, as well as women’s business centers.
Additionally, it’s a good idea to reach out to the SCORE and Small Business Development Center (SBDC) resources that are available in your area. SCORE is helpful because it’s a free, nonprofit volunteer group of retired business executives who want to help out today’s entrepreneurs. Even if they aren’t available locally, SCORE offers assistance to small businesses online in the form of advice and counseling. The SBDC is part of the SBA: it exists solely for the purpose of helping small businesses get loans.
Find the Right Kind of Loan–and Lender
Because there is no one way to run a business, there is no one way to fund one, either. For example, if you are a small, local business, you may do better by applying for a loan with a small local bank–where you may even know the staff personally–than applying for a loan with a large national bank that sees you as one more company among thousands.
If you don’t think traditional lending is for you, one option for a business, especially if it is just getting started, is an alternative lender loan. Unlike traditional banks, alternative lenders, such as Currency have a greater chance of approval with more flexibility in requirements and faster funding time. To learn more about alternative lending options, take a look at this article to see if this might be a viable option for your business.
Anticipate how the Lender Will See You
Another important factor to consider is how your company is viewed by lenders. After all, if the investment seems too risky, you won’t be successful in getting funding. So you will want to ensure that your credit is good–and for new business owners, this means personal credit, as lenders will not be able to see the actual credit history of a business that has not yet been started.
It’s important as well to ensure your online presence is professional. Your website will have to be up to date, and your presence on sites such as LinkedIn, Facebook, and Twitter should be engaging and polished.
For any small business just starting out, getting the right loan and knowing how to be taken seriously by lenders are keys to success. By taking the right first financing steps, you will be well on your way to getting the funding you need. If you’d like more personalized guidance on the first financing steps you need to take to launch your small business in the new year, contact the Currency team.