3 Tips For Small Business Funding
- Evidence Consistent Cashflow
- Prepare Your Credit Score
- Acquire All Documents You Will Need
What Can You Do To Help Small Business Funding Applications?
Some of the common mistakes and things to be mindful of:
Having helped many small businesses fund various projects – there are some key elements to get right when looking to fund SMEs.
Whilst there is normally a solution available for small business funding, the biggest problem we encounter is the inability to show consistent cash flow, ideally over several years.
Businesses that show little or no cash flow cannot demonstrate the ability to repay any funding.
Poor bookkeeping and inconsistent business practices such as mixing business and personal bills together, or not correctly filing tax returns, can prevent businesses from successfully obtaining funding.
Don’t leave it too late to arrange borrowing facilities.
All too often businesses are seeking funding when there is already a financial problem, instead of future planning and cash flow assessment well in advance, which would ultimately provide them with more favourable options.
With nearly 6 million small businesses at the start of 2020, anything these businesses can do to survive and thrive would surely be of great help.
Ways to prepare and improve your credit score, include:
1) Evidence where you or your business reside.
Registering with the local council via the electoral roll will help and having a landline can also assist with this.
2) Build some sort of credit history.
Showing something is better than having no credit history at all, as it gives something for a lender to asses. This can be an issue with start-up businesses that are yet to build any credit history and therefore prove their ability to repay, so the earlier you start this, the better.
3) Reduce your credit utilisation.
Credit utilisation refers to the percentage of your credit limit used during the month and on an ongoing period. For example, if your credit limit is £10,000 and your have £7,500 of debt on that card or account, your credit utilisation is running at 75%.
As a rule of thumb, a credit utilisation of below 25% is a good limit to keep within as it shows you are in control of your debt and therefore looked upon favourably by lenders.
4) Make regular and reliable repayments.
The more reliable your business is at repaying any existing credit, goes a long way to showing any potential new lender, or investor, that you are capable of managing credit facilities responsibly.
Ideally, repaying any credit facility in full, each month is great and will almost always improve your businesses credit score and help with any new small business funding application.