Finance Tips for Startups … Tools for the Task
By TLB Contributing Author: Martin
Finance Tips for Startups
Is your startup business rapidly expanding? Dealing with business growth requires access to funding that can help start-ups take advantage of opportunities in an ever-evolving marketplace. Here is the information you need to know about procuring finance to grow your new business.
Sourcing A Loan from a Bank
As a start-up, this is just not going to be a feasible funding strategy. Big banks do not like to take a risk on small business as they feel that there is too high a possibility of default on the loan. As a startup company, you will have no credit history, and you will have no collateral or assets that the bank can use as security for the loan.
Sourcing A Small Business Loan
The big banks may not want to touch your business, but there are lenders out there that would love to loan you the funding you need. Micro lenders offer small business loans to startups, without an extensive due diligence process and even if you have no credit score. Their business model allows them to take more risk than the big banks and they can facilitate small business loans with excellent rates.
#1 Build A Credit Profile
Since you are not able to loan from the big banks, taking a loan with a micro lender is the only real option. However, a small business loan from a micro lender will be your initial step in forming your credit record. Keep your payments on time, and you will begin to build a credit score that you can use as a track record when you want to apply for institutional finance in the future.
#2 Support Cash Flow
Cash flow is the number one area that startups fail to manage correctly. Cash flow determines the financial health of your business, and without it, failure is just around the corner. A small business loan can give you a cash flow boost as your business expands and takes on more capacity.
#3 New Equipment Purchases
Do you need equipment to get your startup off the ground? A small business loan can provide you with the money your need for servers, hardware, and other operational expenses such as bandwidth.
When A Loan Won’t Help
Taking on a credit facility is a big responsibility. If you commit to a loan agreement, then you will be expected to honor your side of the contract. If you know that your business is in financial trouble, then acquiring a loan to fund operational and lifestyle expenses would be completely irresponsible and possibly hurt your financial health in the future.
Using a small business loan to cover your cash flow needs and help you purchase equipment to get off the ground is a viable financial vehicle with real value. The advantages are clear; however, you may not have the same ease in selecting a credible financial services provider. Some micro lenders charge extortionate rates to their startup clients. Make sure that you have your accountant and lawyer go through any loan agreement before you commit to signing it, once it’s in writing, it is official.
Avoid the pitfalls of finding the right micro lender, visit smallbusinessloans.co and arrange a consultation where their professional team will break down your loan options and give you the advice you need to make an informed decision.
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