The greatest challenge small businesses have is getting loans. Almost nobody will be willing to give loan to a small business because they are often high risk ventures – you never can tell how soon they will fold up. What then happens to the genuine small business owners who are determined to succeed?
Inasmuch as small businesses have a culture of nonperformance, those who are determined to succeed can still get funding to either start or expand their businesses – we all know that the national economy is driven by small businesses. The reason for underperformance of small businesses is often because they take up loans without proper planning.
Most of the financial institutions that are in the position to help would often require that you present your cash flow statistics, that is, how much money comes into the business and how much money goes. As a starter, there is just no way to make this presentation.
Factors to consider before applying for loans
As a small business owner, it is paramount that you consider various factors before ever applying for a loan. This will help you to be prudent in utilization of the loan when you do get it. Some of the factors to be put into consideration include;
1. Do you have a proper business plan?
A business plan is like a guide to help you plan efficiently every step of your business. Every business, just like every building, is supposed to be guided by a well-structured plan. It is in this piece of document that you evaluate your expenditures and projected income. A good business plan alone can guarantee you a loan facility from an investor who sees great potential in your business.
2. How much do you need?
This is the mistake many small businesses make, taking more than they need. Whenever you have the opportunity to get a loan, always have at the back of your mind the consciousness that borrowed money must be paid back. With this consciousness, you would have the discipline to take just what you need and not more.
3. How much capital have you invested in the business?
Your chances of getting a loan become slimmer as the amount of finance from your pocket you put into the business nears zero. Investors are always keen to know how much of your own finance you have put into the business and it I just logical, if you as the business owner are not willing to stake your money in it, how then will you convince another person to do that?
4. What type of funding do you need?
There are grants (in which you are not required to payback) and loans (which need to be paid back over agreed space of time). Before seeking for fund, be sure of the type you require so that you don’t run into financial troubles over time.
The need for long term plans
Most short businesses are often too preoccupied with now that they forget to think about the future. For any venture to be sustainable, it has to be backed up by a long term plan and in this case, long term financial plan. So before thinking about the funds, have this at the back of your mind.
- The greatest challenge of small business is funding.
- Small businesses are high risk ventures.
- Financial institutions will require cash flow statistics to give out loan.
- Every business should have a proper plan.
- Always borrow only the amount you need.
- Be conscious that borrowed money must be repaid.
- Consider going for grant or loan.
- It is good to always have a long term plan.
- National economy is driven by small business.
- A good business plan sums up expenditure and projected income.
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