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4 Financing Mistakes New Business Owners Make
There are so many components that make up the launch of a new business that sometimes the most important part gets lost in the shuffle: financing.
To help set new entrepreneurs up for success, we've outlined four common mistakes that are made when the search for business or franchise funding begins:
- Not Cleaning Up Your Personal Credit
When you're applying for loans or new business credit lines, your credit score will be taken into consideration by lenders. If you haven't demonstrated sound budgeting in the past, it'll be all the more difficult for you to prove your capabilities. Be sure to pay all of your monthly bills on time and minimize inquiries to your credit report in advance of applying for funds.
- Not Doing Your Homework
Many new business owners underestimate the amount of capital they'll need to launch their venture and, by default, short-change themselves. Don't let that happen to you. Be realistic about the equipment you'll need; the cost of rent (or purchase of land); payroll; marketing and of course, an emergency cushion for unexpected expenses. It's better to overestimate the amount you'll need and have an extra reserve to draw from than to have less and require additional funding down the road.
- Not Using An Experienced Provider
Financial firms and banks that offer deals that are too-good-to-be-true are often doing so out of desperation - and that's never a good sign. Gimmicks can be a mask for deeper issues such as inexperience or poor customer service ratings. When searching for a service provider to help you facilitate funding, make sure they have a favorable Better Business Bureau rating and a respectable number of clients and transactions to prove their worth.
- Not Researching All of Your Options
There are many new entrepreneurs that mistakenly think loans are their only option, and if they don't qualify for them, they might as well pack up shop and go home. In reality, there are a variety of alternative funding methods that may be used with or independently of a loan. These could include, but are not limited to: retirement-fund financing (Rollovers for Business Start-ups); unsecured loans and portfolio loans. Be sure you've exhausted every option before you give up - chances are the right firm will be able to get you funded.
Most of all, remember to ask for help when you need it. There are professionals ready and waiting to help you through this most exciting time in your life.