People who have been involved in several start-ups understand the difficulties connected with finding business funding. More and more small business owners are looking for reliable sources of their business funding and are willing to increase capital to more future ventures that demonstrate great potential.
If you are a small business owner who needs money to grow business bigger, in this article you will find some key considerations and reliable tips for choosing the right business loan.
Review Your Business Finances
Before thinking about expanding your business, thoroughly examine your records to make sure your venture is ready for loan approval. Most UK lenders will ask for documentation that can prove the strong performance of your business and will guarantee high likelihood of paying it off.
Such useful bookkeeping tools like Sage and QuickBooks or Xero can assist you in documenting your expenses and income, giving a detailed review of business performance. It’s really important to separate your business and personal finances in order to show the financial stability of your business. More than that, you can even open a credit card and a bank account under the name of your business.
Use Credit Cards Frugally
We all know that credit cards provide quick funding for a variety of needs. That’s why a lot of British entrepreneurs use them as a fast way to fund immediate expenses of their business. However, you should use them sparingly because credit cards have not only advantages but also some financial drawbacks. For instance, many entrepreneurs complain that credit lines are very low and not enough to cover their goals.
Furthermore, using more than 50 percent of your credit lines can lead to your credit scores being dropped. This may not only lower the amount of personal borrowing but also make the process of borrowing more costly. So, using credit cards can be righteous during the early stages of your business growth. On the other hand, they can limit your long-term and large growth plans.
Borrow From Family and Friends with Caution
Usually, when Brits set up a new business or their venture is in its early stage, they prefer to accept funding from family and friends as well as use credit cards or their personal savings. Of course, when you start to pursue your dream, those who know you well can easily recognize your passion and talent. However, you should remember that it’s quite tricky to blend your personal connections with business, as it requires a delicate balance.
Don’t forget that you will involve everybody in your risks, and relying on your closest people will give you only a limited amount of funding. So, it’s better to measure your cloth seven times before you cut as the risks connected with borrowing from your relatives may outweigh the short-term and temporary financial benefits.
Don’t Count Only on a Bank Loan
In the past, a visit to a bank in order to apply for a business loan required big time investments and extensive paperwork for UK clients. On one hand, it’s more convenient because you will usually pay lower interest rate when you apply for a small business loan.
On the other hand, banks tend to lend bigger sums of money than most small businesses need. Banks demand lots of documentation and extended review timelines, which results in a decline more than half the time. Sometimes a business may not be eligible for taking a traditional bank loan. In this case, the best option is to apply for tech-enabled online lenders who won’t require waiting long weeks.