One of the toughest (and scariest) parts of starting your own business is finding adequate funding for it. You might have a great idea, an enthusiastic team, and quality product or service, but without the funding your idea will stay just that — an idea. The process of finding and acquiring small business funding can be complicated, and it can be really easy to make mistakes. Here are three of the worst things you can do when you’re looking for funding and how to avoid them.
One of the worst things you can do when you’re seeking small business funding is being under-prepared. Lenders will only choose to lend to borrowers who they believe will be able to pay a loan back, so you need to be able to show them how you plan to do that. You’ll also need to be able to justify the amount of money you intend to borrow and what you’ll use it for.
You should make sure that you do your homework to find the least expensive ways to start your business. Maybe you can lease equipment rather than buying it outright, or you can rent a space rather than buying one right away. After you’ve done your research, you should create an itemized and comprehensive budget and estimate how much you think the business will earn.
Looking for funds in all the wrong places
Another mistake that people make when they’re looking into small business funding sources is looking for them in the wrong places. Rather than looking to get funding from behemoth faceless lenders, you should look for a lender that prefers to help small businesses and wants to help your idea become a reality and grow.
There are a number of small business funding services out there. One of the best ways to find them is to look at which lenders participate in Small Business Administration (SBA) funding programs. You and your business will be connected to your lender for years, so choosing the one that works for you and your business is essential.
Not knowing your options
According to the SBA, lending to small businesses increased by more than 10% last year, and the year before that it increased by almost $2 billion. There is more and more funding available for small businesses, and if you don’t know the first thing about the types of small business funding you might qualify for, you might miss out on a great opportunity.
Business funding services can help you figure out what types of funding you’re eligible for and help you acquire it. There are a lot of different factors that determine eligibility and a lot of business funding options out there, so it might be best to consult professionals if you’re unsure.