Have you ever wondered how to fund your company properly?
Starting a business costs money, even if you try and do as much as possible yourself. For that reason, most first-time business owners go looking for a small business loan to get the ball rolling.
So, to help you out, we’ve gathered small business funding errors you may be making when seeking out small business loans.
1. No Financial Statements
One of the most common small business funding errors is not having financial statements available. Financial statements allow potential lenders to understand the business’s financial health, past performance, and future abilities.
To avoid this error, small business owners should ensure they are examining their financials regularly. They must update their statements accordingly.
This can be done through an internal accounting system or an external accountant. Business owners should analyze their financial statements for costly trends or loopholes.
2. Spending Money Too Quickly
Businesses can easily get carried away with new opportunities or believe that their startup costs will be exceedingly high. Recognize that spending money too quickly can be a financial death knell.
Make smart decisions with every purchase and deal with the different business expenses accordingly. Consider also any long-term costs associated with every purchase.
Track cash flow to ensure that all purchases are necessary and affordable. Prioritize long-term investments that can help the business increase its value.
3. Not Hiring Enough Personnel
When there aren’t enough people to do the job, resources get stretched, the workload goes up, and it’s hard to get things done. To keep this from happening, business owners should make sure they have enough staff.
This is so that the workflow can be managed and customer needs can be met. Business owners should also plan their budgets well to avoid problems with not having enough staff.
4. No Business Plan
Without a business plan, lenders and investors will see your business as risky. This should contain critical information such as your proposed target market, how the business will generate revenue, and the overall risk involved.
By having this information, you will be able to present yourself in the best light. You can build the trust necessary to obtain financing.
Moreover, having a business plan in place will facilitate a smoother process from start to finish. A business plan should also be tailored to the specific type of funding you are seeking and should showcase your strengths and points of differentiation.
5. Not Having a Marketing Budget
Without a marketing budget, small businesses may not be able to effectively and efficiently reach their target audience.
To avoid this mistake, businesses need to allocate at least 5-10% of their total budget toward marketing. This is to ensure that their messages are being communicated to the right people in a timely manner.
Consider different channels and strategies, such as social media and search engine optimization, to engage and reach a broader audience.
6. Not Factoring In Invoice
When utilizing an invoice funding company, one of the most common errors is not factoring in enough invoices. Factor in enough invoices to cover all expenses and potential losses.
Make sure that the invoice funding company does not have access to any confidential information. Businesses should also establish a clear understanding of the cost of the invoice funding company’s services before entering into an agreement.
How to Avoid Small Business Funding Errors
No small business funding journey is without its challenges, but understanding small business funding errors and how to avoid them can make the process smoother and more successful.
Get advice from qualified professionals and advisors to maximize your success. Start your funding journey today!
To keep you on the right track, check back for our latest and greatest small business tips.