Getting funding for your small business is essential but not always as straightforward as you might think. Here are 7 things about funding sources you might not know about but should.
Small Business Funding Facts
You Need to Keep a Positive Ending Balance
Hanna Kassis works for Segway Financial. He says a small business should not only have money in a bank account before they apply for a loan, but a specific amount at month’s end.
“Lenders want to see that you’ve got a positive ending balance,” he says. “Say you’re anticipating needing a merchant cash advance at the end of the month, go put $500 dollars in your bank account.”
Your Personal Credit Score Affects Your Business Financing
Many small businesses like sole proprietors don’t know this when they try to get financing. However, if you’ve been through a personal event like a divorce that has dented your personal credit, your ability to get a loan can be affected.
Having a good business plan will help tip things in your favor.
Personal Bankruptcy Doesn’t Always Spell Rejection
Your personal and business finances are often tied together in a lender’s eyes. However, a personal bankruptcy doesn’t always mean you’ll be rejected for a business loan.
Still, you’ll more than likely need to be patient. Personal bankruptcy can stay on a credit score for 7 years. What’s more, many lenders prefer you wait at least 2 years before you apply for a loan.
You can repair a credit score in the meantime by paying bills on time.
Building a Financial History Can Start Small
It’s important to have a good financial history to get a business loan. Experts like Yumi Clark, VP of New Product Development at Capital One Spark Business, suggest you start small if you need to build one up.
“One of the best ways for business owners to prove their reliability, business savviness, and leadership is to establish a good financial history,” she says. “Microloans can help you build financial history that demonstrates you’re worthy of bigger loans in the future.”
Hesitation Creates Doubt
Hesitating after you get the contract creates a doubt in the lender’s mind that can cost you the funding. Hanna Kassis explains.
“If you get the contract and sit on them and time passes, lenders have to re underwrite the file. If there’s hesitancy on the part of the client, lenders start looking for things they weren’t before as a way out.”
Small business should be ready to go through to the end once they start the process.
“Money waits for no one,” Kassis says.
A PO Box Can Sink a Deal
The information on any application you need to put down is pretty basic. However, there’s another chance to make a deal killing mistake here. Don’t use a PO Box for your business address.
This goes for your personal and business information. Being transparent and putting down your physical address is the best practice.
Incomplete Applications Raise Red Flags
Missing something as small as a digit in a social security number or ZIP code can be a red flag to lenders. Quite often missing any of these details can cause them to start searching on the Internet to see if there’s any bad content on you posted there.
Double check your input or get a trusted person to look it over before you send it.
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