Content provided by a guest contributor.
Many business owners wonder how to apply for business funding because many business owners will find themselves in a scenario where their business needs extra money. There are certain steps to take for the physical process of applying for business funding in South Africa. And then there are steps to take for the financial wellness of the business during the process of acquiring business finance.
We’re going to go through all the stages of applying and obtaining business finance for your business. This will make the process easy, and help you to be approved with no hassles.
Pre-allocate the business funding
As a business owner or potential business owner, if you’re looking at funding options for a small business startup, there are many reasons why you would apply for business finance. Seeking business finance can help you to grow your business, hire new talent, change office locations, buy new equipment, upgrade operations software, invest in inventory and more.
What’s important, however, is that you pre-allocate business funding before you’ve obtained it. It’s not advised to apply for funding without a clear budget and plan as to what the money will be spent on. This will also stop you from spending the loan or business finance on everything other than what you originally intended it for.
For yourself, and the sake of your company, make sure you know where every cent of business finance is going to be allocated, and stay on track with your business plans. This is the part of applying for business finance that has your business’ wellness in mind.
Before you can apply, you need to do some research about possible lenders who could help your business out. You need to consider their application process, approval time, finance requirements and the repayment options.
Choosing the right lender will not only make the application process a straightforward one, but it will give you peace of mind about the financial investments you’re going to make. Seeing what different lenders are offering will also ensure that you get the best repayment deal for your small business. This way, you will sign into a financial contract that your business can actually afford to pay back and not fall into unnecessary debt.
Work on your credit score
Another factor that will affect the best possible repayment terms and whether your application for business finance goes through is your credit score. For any loan or business finance agreement, your credit history and credit score will play a big role. .
Therefore, it’s something that should be worked on and improved constantly. Debt is one of the largest credit influencing factors. So, it’s important that you manage your business’ current debt before you apply for finance which will temporarily put you further in debt. With a great credit history, the odds regarding business finance are ever in your favour.
Budget for it
Once you have the above information, you will be able to use a business finance or funding calculator to work out exactly how much will need to be repaid every month. And then you need to start budgeting for it.
This will become a priority expense that should be repaid as soon as possible. For the repayment period, you might need to cut a few of the more necessary business expenses in order to pay back the loan quicker and with a lower interest rate charged.
Have a solid business plan
As much as you need a plan for the funding you’re applying for, most lenders will want to see your general business plan. It’s a risk for them to lend large amounts of money to businesses they don’t know. The least you could do is provide them with your business plan. This will give them an idea of who you are as a company, what your values are, what the business’ goals are, where the business is going and how the money would likely be spent.
This will also show the lender how your business is doing in terms of finance (like your annual revenue, for example), which will set their minds at ease as to whether you will be able to afford to pay them back. It might need to include your assets and any collateral that might be required to secure the loan. For this reason, a detailed business plan is probably the most important piece of information that you will need to provide as a motivation for them to approve the loan or business finance.
This is how to apply for business funding in a way that will ensure application approval and responsible management of those funds. If you prepare for your finance application properly, your business will benefit greatly and you won’t easily fall into a debt-setting situation.
The content in this article was provided by Tasmin Copley, Junior Writer: Rogerwilco – a South African marketing agency based in Cape Town.