Financing a business is a serious challenge, anytime, both at the level of start-up for small businesses and to sustain corporate organizations. For any business institution to remain in existence money has to keep circulating in it – almost the same way that blood circulates round the body of the living being. Hence you can call money the blood of any business.
Economic recession has made the process of seeking funds more daunting
While many nations are yet to be hit hard by the economic downturn, others are either reeling in it or struggling to get out of it. For this reason, lending institutions have stiffened their monetary policies to minimize their loss; although the redesigned lending policy favors the lenders, borrowers are left gnashing their teeth because of the increased stress they have to endure.
The major challenge of any borrower is identifying the right financing solution
There are many lending institutions offering financial aids to businesses and all of them have different terms and conditions the borrower has to abide with. Identifying the financial institution that will fill the financial need gap of a business is probably the most daunting task every business owner have to resolve because choosing the wrong financing option will definitely harm the business.
Short term solutions should be for short term problems
There are financial institutions that offer short term loans and others that offer long-term loans. Every business is either faced with a short term financial crisis or long term. As a business owner, you have to know when to go for short term loans and when to go for long term loans; using one to replace the other may lead to increased financial indebtedness.
A business owner should always work with financial advisors
The success of every business to a large extent depends on the team of financial advisers they have. When it comes to matters of finance, a business owner should never make the mistake of taking a solo decision, rather, they are to work with their financial advisers to identify the existing financial challenge, then, draft a compelling reason that will make the lender willing to assist.
Advisers can be an internal staff
Advisers need not be an external body. It is often preferred that the team of advisers comes from the inside because they will better understand the business need than a person coming from outside. The controller or chief financial officer or a third party accountant or experienced financial intermediaries of the organization can serve in the capacity of financial adviser for the firm.
Bank loan is usually the first sought intervention of many businesses
It is sad that a lot of business owners do not know of any other lending institution besides the commercial banks. Getting a bank loan is very difficult because they usually have a large number of loan applications to deal with. Secondly, their requirements for loan approval is usually large and not every business can meet up with these requirements.
There are several other loans to try in case of failure to secure bank loan
If you have given the bank loan a shot with all you have; a well arranged file containing all the requisite documents including your profit and loss statement, your credit score and so on and you still fail to be successful, it is time to try your hand on other alternative lenders using the asset available to your company. The popular alternative lenders are; bank credit lines, receivables purchasing, working capital loans, inventory lines of credit, commercial mortgages, purchase order financing and tax credit financing.
- Financing is the greatest challenge of many businesses.
- Money has to be in circulation for any business to remain in existence.
- The recession has made lending institutions to stiffen their monetary policies.
- Lending institutions always devise means to reduce their risk of lending.
- The different lending institution will have different terms and conditions of operation.
- A business owner must carefully decide between short and long term loans.
- Financial advisers are crucial to every business.
- Financial advisers can be an internal staff of the organization.
- Bank loan is usually the first loan many organizations will seek.
- If your bank loan is not approved, you can choose alternative lending sources.
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