Securing business finance is seen as a tricky process. With many business owners stating that securing finance is an impossible task. Lenders have a different story to tell. Finance is readily available and lenders are happy to release finance. The facts are, that finance is available, However, lenders now require businesses to put forward a stronger business plan. With an emphasis on a repayment plan and a justification of how strong the business is. Today we will look at 5 ways to secure business finance.
Show that your business creates a steady flow of cash
Cash is king and the number one way of proving the health of your business. By showing a steady cash revenue stream you are proving your ability to maintain a healthy repayment plan. Lenders are looking for a steady cash flow. Not an erratic, seasonal revenue stream. The businesses that are successful in applying for finance are those that show a steady month on month revenue stream.
It is important to support a cash revenue forecast with historical data. A future cash forecast should be supported by historical revenues. Through providing previous bank statements and tax returns you can prove the liquidity and performance of your business to potential lenders.
Maintain a manageable debt level
Your debt load is the debt carried forward on your balance sheet. The lower the debt load, the greater the chance of obtaining finance. If your business has an existing debt load. You need to prove to potential lenders. That your current debt load is manageable. As well as proving that any additional debt, will not be the straw that broke the camels back.
It is import to provide a forecast as to how any additional debt will be transferred to future profits. If you can provide a strong financial case showing that any expansion will equal profit. You will find yourself in a stronger position. Those businesses that fail in obtaining finance. Often fail due to not providing an adequate justification. As to where finance will go and what that finance will generate.
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Prove and Maintain a positive payment history
If you have a chequered payment history. You are immediately starting on the back foot. Your lender will conduct a study of your payment history through a third party credit report. Do not blindly let a potential lender make a decision based on a third party credit report. Ask if you can view it. Then provide additional financial data supporting your positive payment history. Credit agreements with suppliers, private investor loans, and trade partner agreements. Can all show a positive payment history. That will not appear on a third-party credit report.
The key to success is providing information. You can never provide too much information in order to support your credit application. Especially when it comes to showing a positive repayment history.
Show your business judgment and history of success
If you were applying for a job. You would issue a CV and sell yourself. When applying for finance the same rules apply. Potential lenders want to see a history of success and most importantly the ability to overcome challenges. Look for the potential future challenges your business will encounter. Apply futurology and show a clear plan for overcoming the potential challenges you will face.
Show you have a solid management structure in place. If anything happened to you, the business owner. What will happen next? Do you have someone with the same drive and commitment to step into your shoes and provide a seamless transition?
Shop around and then shop around some more.
Do not make the fatal mistake of assuming your current banking provider will lend you the money. Conduct research, compare rates and terms. Look at finance providers who have a strong track record when it comes to lending. Look outside of the box and consider those lenders that are not high street banks. Compare the market through a third party comparisons website. This will save you a great deal of time. As well as allowing those who understand business finance the opportunity to point you in the right direction.
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