There are many sources you can consider for first-time business funding, but understanding the top small business do’s and don’ts for securing funding solutions can ensure you pursue only those that best fit your business’s unique needs.
Here are some small business funding tips to make securing funding as seamless as possible.
Do: Confirm that you meet the basic minimum requirements to apply
Small business funding solutions have undergone significant changes since the 2008 financial crisis. Though there is evidence that alternative lenders and some major financial institutions have successfully adapted their small business product offering to meet the needs of those seeking first-time business funding, many community banks have shifted away from the small business customer.
Because the application, underwriting and approval process to secure small business funding may require a significant investment of time and energy from entrepreneurs, confirm that you meet the basic criteria for any funding solution before you apply. Common criteria may include:
- A certain number of years in business
- Minimum monthly revenue
- An established credit history and score
- Business plans and financial projections for the future
- A required minimum or maximum dollar amount for the funding solution
Don’t: Settle on the first funding solution for which you qualify
You may have to look a little harder to find the first-time business funding that’s a good fit for your business, but don’t get so discouraged by the process that you enter into an agreement that includes unreasonable terms or rates, requires repayment programs that put your cash flow at risk, or otherwise cause you to sacrifice your business’s financial stability. Rates and terms offered by different financiers can vary significantly; some may even charge interest rates that are double those imposed by others who offer a similar product.
Do: Prepare your business finances before you seek funding
Not all small business funding solutions prioritize the same type of criteria, but you’ll likely have more choices in the types of partners you can work with if you take steps to prepare your business financials several months in advance of trying to secure funding. If you don’t have an established credit history, for example, it may benefit you to open credit accounts with your vendors before you try to secure a funding solution. Likewise, take time to analyze and understand your business’s unique sales cycles and potential threats to future demand before you commit to a funding solution.
Do: Consider funding solutions that fit your needs now — and in the future
Your first-time small business funding needs will likely be very different than those you’ll have five or 10 years from now, but you’ll likely benefit from developing a relationship with a funding partner who wants to understand the business you have now — and the one you hope to have in the future. When you enter into a relationship with financing partners who truly want a relationship for the long term, you’ll likely have more access to the financing arrangements that suit your business’s unique needs, and support its financial stability and future growth.