If you run a small business then you will be looking for funding at some point. There are many reasons that you may be looking for funding. If you are just starting your business then you may need to have startup funds. If your business is already established then you may need some extra funding to expand your business or pay some bills during a tough time. When you’re looking for small business funding, you will want to keep a few things in mind to make it easier.
– Main Source of Small Business Funding
You may already know this but banks and credit unions are the main source for funding. This means that if you’re trying to get funding that you’ll want to start with banks or credit unions that you already have accounts with. If you have multiple accounts with a bank or credit union that are in good standing over a period of time, then you’ll be more likely to get funding. This is because they will see it as another opportunity to make money and they will know that you can manage your business’s finances. Creating business accounts will get you the most attention from lenders, be sure to set up your business correctly, register with the Secretary of State website and list your information in the 411 national directories. Lenders look at all documentation to ensure you are a real business and have proof to back it up.
– You Business’s Industry and Size
You may have never taken into account the size of your business or the industry you’re in. However, you may have a higher interest rate if you have a smaller business or you’re in a certain industry. In some cases certain industries can’t get funding from some of the government loans. A lot of lenders see certain industries as a high risk industry.
You should learn what SIC codes are considered high risk for most financial institutions before registering your company and ensure you are listed under one that falls into the safe category, you can always do the business such as investing that you set out to do, just do it in a separate division of the main company. Finally it’s important that you remember that your personal credit history may and will probably be viewed carefully by potential lenders. What does this mean exactly? It means that if you have bad credit or no assets that you may not even be considered for any of their small business funding. Even if you have excellent credit history and assets you may be required to sign a personal guarantee that you will repay the loan. It’s important to know all of these things when you’re looking for funding.
– You should separate your personal credit from business credit to obtain the money you need from lenders for your business. With a good business credit file you can obtain double, triple, and sometime quadruple the amount you would have qualified under personal credit.