As a new business owner of a start-up, you will need to have enough capital to get your business up and running.
The first few months to the first few years are the most precarious time for a new business, especially regarding the revenue of the business. Finding your footing within the industry you are in and increasing demand for what you offer does take time. It is common for business owners to initially fund a new business using their own personal savings. This saves them from potential debts, repayment, or other financial troubles in the event the business does not last. This is a smart start, but eventually, business financing is necessary.
You will, of course, be spending quite a bit of money at first to keep your business afloat in its early stages—likely more than you will be earning. But this is not a reason to get discouraged from starting a business venture or continuing a new business.
When is the right time to seek out business financing, then? It does differ from person to person, but here are a few questions to ask yourself to make the decision-making process a little simpler.
1. Do I Have the Time?
Searching and applying for business financing can be a long and tedious process. Ensure that you will have the available time to put toward the process.
You will need to do work on your end before connecting with potential lenders or applying for grants. This includes knowing what you will need financing for and why, as this will show lenders you are well-informed and active in your business relations.
2. If It Is Time to Seek out Funding, Which Route Do I Take?
Be informed of the various options available to you with regards to business financing. The term business financing basically encompasses a wide array of options. Do the necessary research before settling on one choice. The bank is not your only source of funding, although bank loans are ultimately what many business owners turn to as they are the most known. Furthermore, it’s not just major banks that provide loans; smaller banks may also be a viable option.
Along with bank loans, there are other sources of lending such as online funding sources, business financing agencies, applying for a business line of credit, and so on. There are also grant programs you could apply for. Explore all of your potential options thoroughly.
3. What Does My Credit Score Look Like?
If you start seeking out business financing, know that your credit score will be evaluated. This gives potential financial loaners an idea of your business credit history and lets them evaluate your compliance with financial deadlines. Things such as your mortgage and personal credit accounts will be looked at.
4. Should I Follow My Gut Instinct?
We often know more than we give ourselves credit for. Listen to your gut and the little voice in your head. If there is a business opportunity that is presented to you and you strongly think it will benefit the business, you should go ahead and take it on.
If you need to apply for some business financing for it, then start looking for the right funding methods. The more confident you are, the more financial lenders will care to work with you.
5. Will I Be Expanding the Business?
Going forward with new opportunities, if you know you would like to expand your business, then seeking out help with financing may be necessary.
Think of the scope in which you’d like to widen your business. With that, make a list of the expansion process that will further allow you to know exactly what kind of financing you will need.