Steps to Getting Small Business Financing: The Top 6 Mistakes

An increasing number of people are trying their hand at self-employment these days. Having enough money to cover business start-up costs is a rare but highly sought after commodity. The odds that a small business starting today will still be operating five years from now are less than 20%. This can be very discouraging, but to fit within the successful percentage, you must avoid the top six mistakes of getting small business financing.

Step 1. Ask for 100% of your capital requirements

This is the most common mistake made by people seeking out loans for small businesses. There needs to be an equal amount of risk for both borrower and lender if you are to appear committed. You should plan to borrow between 50% and 70% of what the total business start-up costs will be.

Step 2. Establish poor working capital projections

Start-up businesses have a focus on acquiring the space they will operate out of, any improvement costs, expenditures, and assets. A mistake of new business owners is to underestimate the amount of cash flow they will need to keep their businesses alive until they reach maturity and can be self-sustaining from month to month.

Step 3. Fail to establish a purposeful business plan.

The fundamental importance of a realistic business plan goes well beyond qualifying for loans for small businesses. Unfortunately, in the eyes of many small business owners, the need for a business plan does not go beyond acquiring funding. If a more serious approach to writing and sticking to a business plan were taken, a greater number of businesses would not fail.

Step 4. Have a poor presentation to the lender

Your presentation will either inspire your lender or turn them off. While it takes weeks to find out if you have been approved for the money you need to cover business startup costs, it takes only seconds to lose any really chance of receiving funding.

Step 5. Lack a marketing plan

When laying the groundwork, your marketing plan will consist of advertising and offering “grand opening” sales, but you cannot simply sit back and wait for the flood of customers. Instead, business owners should procure letters of intent to do business with your company once it opens.

Lenders will give out loans for small businesses to people who can prove their competence in regards to the subject they want funding for. By compiling a resume, examples of previous related work, and letters of reference, you can improve the lender’s confidence in you. Please visit stepsto.com for more great business advice.