Most entrepreneurs know from the get-go that the odds of success are slim. Indeed, just 35% of start-ups stay open longer than a decade! The result?
You can’t afford to make too many mistakes along the way.
…Especially with financing. When it comes to the funding that could propel your company to glory, it’s imperative that you both apply for and use it wisely. Alas, many people struggle in this regard!
Want to learn about 4 common small business financing mistakes and how to avoid them? Keep reading.
1. Obtaining Insufficient Funds
Few challenges are more debilitating for businesses than running out of cash. In fact, this is one of the primary reasons new operations have to close down! With more cash going out than coming in, it’s only a matter of time before you get into trouble.
Keep that in mind as you apply for funding. Although you don’t want too much (more on this coming up), make sure you obtain enough capital to cover whatever expense(s) you need the loan for in the first place.
2. Borrowing Too Much
That’s right, there’s such a thing as too much money! Contrary to what many people assume, accepting the maximum amount of funds from a lender isn’t always the best course of action. Why?
Because you can end up being over-leveraged. Having so much debt on your hands can put you in a precarious financial position. As a result, you may find it harder to obtain future funding if/when you eventually need it.
3. Forgetting About Fees and Rates
It’s also really important to know the true cost of the money you’re going to borrow. After all, asking a lender for $10,000 doesn’t mean you owe that much, right? You have to repay that $10,000 plus interest (as well as any fees you may encounter).
Only sign the dotted line when you a) know and b) feel comfortable with the final figures. Likewise, steer clear of lenders who offer small business loans with no transparency around their rates.
4. Turning to Untrustworthy Lenders
Not all lenders are made equal! With no shortage of scams and loan sharks out there, you have to be very careful about who you take money from. Unfortunately, in their eagerness to obtain funding, many entrepreneurs don’t consider their business financing options and rush into the first offer they receive.
Avoid that fate by taking your time with the decision. Whether you need PO financing or a classic bank loan, always shop around for the best possible deal and be diligent with your research. Reading online reviews and speaking to other owners are both sensible steps to take as you attempt to find a trustworthy, reputable lender.
Don’t Forget These Small Business Financing Mistakes
Are you on the hunt for funding to get your company off the ground or take it to the next level? Well, we hope this post will help! Keep these small business financing mistakes in mind, consider your long-term business goals, and you should enjoy a smoother process from start to finish. Now, the insights in this post should provide a useful introduction to this important topic. However, there’s much more to learn! To deepen your understanding of it, search “business” on the website now.