Beginner’s Guide to Business Finance

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Welcome to the world of business finance. Full of tempting offers and lots of promises, applying for business finance seems to be exactly what every self-respecting business should do. But is it? In this beginner’s guide to business finance, we look into your options for it, what you need to have in order to apply for it and how it could be used to benefit your business.

Understanding Your Business Finance Options

Like with most things, when it comes to finance for a business, one size does not fit all. Consequently, there are many different options available:

  • Term loans
  • Overdrafts
  • Peer to peer lending
  • Line of credit
  • Grants
  • Pre-sales
  • Angel investors
  • Business incubators and accelerators
  • Crowdfunding
  • Friends and family
  • Venture capital

The type of business finance you choose does matter significantly, which is why taking your time to chat with a business advisor makes good financial sense. We’re here to help: book a time now.

How to Get Business Finance

Just like when applying for a residential mortgage, you need to be fully prepared, although in a slightly different way. While there will be specific criteria for each finance option, in general you will need to have organised your:

  • Business plan – what is the opportunity you are needing cash for? How will you take advantage of it, and what exactly will each dollar be spent on? What are the risks and how will you manage them?
  • Finances – you’ll need a budget which demonstrates how you will meet and make finance repayments, details of past and future cashflow and two years of profit and loss statements.
  • Security – if required, what security can you offer the financer to mitigate the risk of lending to you?

Once you’ve put your application together, it’s time to approach the financer. Remember, they’re not wanting the wow factor, but rather how you will meet repayments.

Beneficial Ways to Use Business Financing

Like with any type of repayable financing, it’s important to note that it does involve going into debt. Because of this, you’ll want to make the right decisions as to what you will use it for. Some examples of financially smart ways to use it include:

  • Purchasing new equipment which will allow you to produce your product or service faster and more cost effectively
  • Debt consolidation – rather than paying lots of little loans, refinancing into one with a lower interest rate will save you cash
  • Marketing – paying for an advertising campaign to bring in new clients or customers to boost your cashflow
  • Purchasing inventory – especially for seasonal businesses, using financing to purchase new inventory for the upcoming months can make sense

Before you jump headfirst into obtaining any business finance, give us a call. We can help you decide if this really is the best option for you, and help you create a workable plan to obtain and repay it.

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