While some people are lucky enough to have starting capital to get their business on its feet without outside input, most new businesses will need outside funding to get them going.
Fortunately, there are many lenders and products out there that are geared specifically towards businesses that have just launched, or are about to do so. However, careful consideration has to be made to ensure that it’s the right business decision.
In this article, we’re going to look at the most important points to think about.
The first step in choosing the right loan is knowing exactly what you need. It’s rarely appropriate to see what the market has to offer without having a clear view of what you need the loan for. It’s fine to have several plans that depend on what finance is available, but never secure a loan and then plan afterwards.
If your business hasn’t started yet, then your initial business plan should inform your decision making process at this stage. This should cover exactly what you plan to use the money for, the returns that it will deliver, and how you will be able to make the repayments.
If your business is already up and running, then the exact same is true, but you need to have it written down and clear; have a firm idea of what funds you need, how they will ultimately make your business money, and how you are going to repay the money. Excessive borrowing could prove financially damaging in the long run, and insufficient funds might simply not be enough to generate a good return, whether you need the loan for premises, equipment, staff or anything else.
Next, you’ll need to consider the products available to you. There are many, many options on the modern market, and it can be difficult to consider them all. However, if you’re going to get the right loan, then you will need to do the legwork. Choosing the right product can make a significant financial difference.
For most types of loan, the APR rate will of course be the most important figure to be aware of, but it’s not the only factor. If you think you might be able to pay the loan off early, then early repayment fees could hit you. There are also often document fees to be aware of. There are loan comparison websites that you can use to make the job of scouring the market easier, but you still need to ensure you check the small print.
Similarly, you can work with brokers who will help find the product that most fits with what you need, though they may charge commission. The main takeaway then, is that you need to gain a full impression of all loans open to your business and its circumstances - don’t choose the first product that looks to be a good deal. You also need to ensure that it’s a loan that you need - there are other options for business funding, such as overdrafts, and even invoice finance.
The final point we think is important to consider is the lender. Loan products can be great, but if the lender doesn’t deliver the right customer service, then the whole experience might not be satisfactory. Businesses change, which might mean that you need to change or get information about your loan quickly and easily.
Look for providers who will assign an account manager to you, who’ll be able to help whenever you need to talk to someone about the product you’ve taken out. Fortunately, it’s also easy in the modern market to readily find reviews and testimonials from other businesses that have used the same lender. Do your research in advance to ensure that you’re getting the whole package.