It takes money to run a business, especially if you’re planning on purchasing new equipment or expanding. In most cases, you’ll need to borrow to get the necessary funds for your purchase or expansion. You therefore need to avoid these common mistakes:
1. Not following the business plan.
Every business owner understands that it’s a nightmare putting a business plan together, but it’s an essential step. Your business plan should clearly outline what your products or services will be, who your clientele will be, how you will source business, how you will run your business and how it will make money. Include cashflow projections based on assumed income and growth, along with projected operational expenses that include your proposed debt obligations. The cashflow projections essentially provide a potential lender with clear calculations that you will be able to repay your loan.
Preparing a business plan won’t just improve your chances of having your loan application approved, but will help keep you focused, especially in the most critical stages over the life of your business. By continually referring back to your business plan, and comparing your actual progress with your projected plans, you will stay on track and be better able to identify new opportunities or branch out to new ventures.
2. Not reading the fine print.
Businesses require capital to meet ongoing operational expenses and for expansion, but it’s important to know why you need the funds and what loan best suits that need. Are you seeking finance for short term cashflow issues? Are you looking to purchase new business equipment or are you seeking to expand? If you haven’t properly identified why you need the funds, it will be hard to identify the most appropriate funding solution.
It’s crucial to understand and calculate the full cost of a loan before committing to it. Apart from interest expenses, there are likely to be application fees, administration fees and ongoing monthly fees.
Your Launch Finance broker can assist you in identifying why you need the funds, which funding solution most appropriately meets your needs and can explain to you the true cost of the funding solution.
3. Not having enough options.
Don’t just choose the most convenient lender, which may often be your current bank. Make sure that you have plenty of options to choose from by shopping around and understanding what is available in the wider market.
Your Launch Finance broker can assist you in researching the market, understanding what product will best suit your needs and help identify your business and goals in order to offer the most suitable loan product for you.
4. Not checking your credit file.
Make sure you check your credit record before you apply for a loan. Your lender will conduct a credit check on you as the business owner and the business entity. Any adverse findings on your credit file may result in your application being declined. Alternatively, the lender may choose to approve the loan, but build in a risk factor into the interest rate, effectively meaning you will pay more for the loan. Ensure you check your credit file for accuracy, and if anything is incorrect, have it corrected prior to applying for the loan.
5. Not using a broker.
Shopping for a business loan can be tedious, but it doesn’t have to be. Using a Launch Finance broker will help make the entire process convenient, from comparing loans in the market to applying for your loan, right through to settlement. You could potentially save thousands over the life of the loan and we will help you find a loan that works with your business and your identified business goals.
Find the ideal business loan one by taking a closer look at your finances, your business plan, and the fine print. More importantly, use a Launch Finance broker to make shopping for a loan much more convenient.