Do you really need additional financing, or do you only think you need it? Before getting one, here are six vital questions to ask before applying for small business funding.
1. Is Financing Even Necessary for My Small Business?
A huge mistake when it comes to business financing is taking out additional funding when it’s not needed. As your business grows, it’s easy to assume you should have a huge amount of debt to attain that growth, as well as enough capital to pay for expenses that can arise. But it’s not impossible for you to fund your operations with the cash flow that you already have. Not to mention, having a huge amount of capital in your business account might tempt you to commit bad spending decisions.
2. What Does My Credit Look Like?
Good credit is the foundation of all financing. Before applying for small business funding, ensure that your credit profile is in its best shape. This means authenticating that all of your report’s information is correct and that you avoid anything that can harm your profile, such as delayed payments or applying for a lot of credit. Be sure that your business records are accurate and clean, showing that your business is in a solid financial position. While you can’t fake your company’s financial reality, you can time when you apply so you can show your business in its best stance.
3. Do I Feel Comfortable Working with this Funder?
The financing business can be competitive, and you’re spoiled with choices because there are hundreds of companies out there who are willing to meet your financial needs. Even though the most optimal choice is usually the funder with the lowest rates and fees, comfort is another aspect to take into consideration. If you find it difficult to get a response from your funder or they aren’t creating a financing solution suited to the needs of your business, then it’s best to look at someplace else. If your funding encounters a problem going forward, then you want to partner with a company that can understand your situation and offers flexibility in terms of meeting your needs.
4. What Type of Financing is Best for my Small Business?
Different businesses have different needs. While fixed-rate and long-term funding might work well for some businesses, other small businesses could reap more benefits from another type of financing. For example, if you own a restaurant, then applying for a merchant cash advance might be the best option for you. This is so that you don’t have to wait 30 or more days to receive payment on all transactions on your credit card. Small businesses frequently just use a simple credit card, and some companies offer an 18-month, 0% promotional rate on purchases. Whichever kind of financing best fits your small business, you’ll definitely be able to find a funder that provides that option, so it helps to browse around.
5. Where Does the Money Go?
A lot of small business owners borrow as much as possible without understanding where that capital will be sent to. Your business financing strategy should depend on the needs of your company instead of the other way around. If you established a solid business plan when your company was launched, then you should already be aware of where any financing you apply for will go. Your business plan should pave the path of your company for at least the next following years, and it should define the amount of money you expect is necessary to have along the way. If your business plan is not good enough, then it’s best to write down what you need money for, where it will be spent, and how you’ll pay it back.
6. What are the Rates?
Nobody can tell exactly what the rates are going to be. But you can create a good estimate of the general trend of rates determined by the present economic environment, predictions from economists, and news from the Federal Reserve.
Conclusion
REIL Capital offers multiple funding services that are tailored to meet your small business’s needs. From merchant cash advances to invoice financing, we’ve got you covered! Not to mention, our process is totally easy and convenient compared to traditional lenders. You can message our helpful customer service to get you started, and when you’re ready, apply now!
