Secrets of Small Business Financing

Many small businesses have similar issues — how do you turn a great business idea and a solid business plan into a successful business?  Government funding sources such as the Small Business Administration (SBA) and private companies like National Business Helpers are committed to offering small businesses attractive financing and business loans.

One-third of all businesses will fail during the first 2 years. 50% of all businesses fail during the first year in business. Following a few simple guidelines and answering some important questions will help you make smarter choices when it comes to small business lending.

Small businesses are the “backbone” of America and there are financing programs to help your business succeed.  If you know the answers to the following questions as you apply for financing, you are one step closer to success:

What stage is your business in?  Before giving you a loan, the SBA will want to understand how far along your business has come:  already running, in stealth mode, just writing the business plan, or is it still just an idea?

Do you have a business plan?  This is the most important part of obtaining a business loan — lenders often want to understand your business strategy and the specific steps you plan to take to get there.  Many people have ideas but putting those notions into action to secure revenue and make a profit is a whole different story.  A business plan outlines the visions and strategies of the business as well helps to create a road map for the business including how you plan to make money.

How is your cash flow? Do you currently have the cash to run the business? If so, why do you need additional financing?  This is a great time to reevaluate your business and why additional funding will help.  Perhaps you want to expand or purchase some new technology to enhance the business.

How much cash do you need?  If you don’t have the cash for your business, how much do you need and what for?  At this point you may think of several cost factors, from rent (if it is a brick and mortar versus an online business); paying employees or consultants; office supplies; technology, such as computers and mobile devices and more. Understanding what things cost and why they are critical is an important step in getting a loan.

How do you manage the cash flow?  Lenders will typically ask detailed questions about your business and that you will wisely utilize the cash, not to just pay for capital expenses and employees – but perhaps invest it as well.

Is your business a risk?  Be honest here.  All businesses have inherent risks — so try to understand what those might be, but more importantly be able to iterate how you would manage these risk factors.  Rising interest rates, natural disasters, theft and other risks could happen to any business.  Outlining your contingency plan will go a far toward helping you get a loan.

Who is your management team?  Who is managing your business?  You?  Perhaps you have partners or several people managing the business.  Your lenders may ask how strong they are – which could mean anything from their business experience, academic credentials, credit history and more.  Maybe you have advisors or a board of directors – all of these matter to most lenders.