Making mistakes is something you must embrace as a small business owner. It is what will help you grow your business and appreciate your milestones. Besides, business owners who constantly try to avoid failing also don’t achieve much success.
When it comes to small business financing, you are bound to make a few blunders. While this is a normal part of the growth process, you still want to avoid the impact of certain bloopers.
Not Communicating Issues with Cash Flow
Many first time small business borrowers find interacting with lenders intimidating. For this reason they tend to hide their cash flow issues in hope that they will be resolved and not interfere with their repayment schedules. No lender likes it when borrowers default, so you are better off communicating your issues before things get out of hand.
Not Building a Lender-Borrower Relationship
The key to lasting business success is building good relationships with all the stakeholders. The same way you want your customers to see your business as organized and responsive should be the same way your lender sees it. Many small startup businesses make a short-sighted mistake of not nurturing a good relationship with the lender. You can avoid this by acting professionally with your lender, keeping your word and communicating effectively.
Miscalculating the Amount You Need
The design of small business funding has been made so flexible by online providers that businesses no longer stress over documents like a business plan. The problem with this is that some entrepreneurs don’t know how to manage their cash and sometimes end up overestimating or underestimating their financial needs. Knowing the exact money you need, for instance for an expansion project will ensure you don’t end up paying too much interest but at the same time you will have sufficient investments to boost your revenue.
Before seeking small business financing, analyze the needs of your business and make realistic projections. Decide in advance what you will use the money for and ensure that you account for every dollar of the amount your borrowed.
Not Understanding the Cost of the Loan
Small business startup loans are complex for first time borrowers. Even repeat borrowers of these loans sometimes don’t understand the true cost of the loan. To be able to make timely payments and manage your cash flow, it’s important that you find out the exact amount you will be paying for the loan. If you have been given a variable rate loan, understand how the rate changes will affect your monthly payments.