Small businesses in retail or any sector can often find themselves with good reason to apply for a loan in support of their activities and their prospects for future growth. Banks and other mainstream lenders though can be tough to persuade and to use as a source of credit these days, partly because of tough competition and partly because of the tough economy.
Here are 5 tips to have in mind if you’re in the process of putting together an application for a business loan as a retailer or a small company in any industry.
1 – Consider all options
It is easy to assume that banks and other big-name financial institutions are really the only potential port of call when it comes to business lending and loan facilities. In fact, there are a growing number of alternatives to these mainstream lenders available to small businesses.
Increasingly, there are specialist lenders ready and able to offer loans on specific terms to operators in a range of industries. It is just a case of doing the requisite research to find the sources of finance that might work best for your operation. It could be that an excellent finance deal could be available to your business from sources you hadn’t previous considered or been aware of at all, so it’s important to assess all the options on the market.
2 – Leverage your assets
If you have been struggling to secure a loan through the traditional sources then it could be possible to leverage the assets owned by your business to generate the funds you need. So this could mean selling and leasing back expensive items of machinery or using them as collateral in the context of a loan arrangement. You might even be able to use invoices issued to big clients as a means of raising cash quickly and in ways that prove cost-effective and well worth your while.
3 – Be honest with any potential lenders
It can be tempting to paint a very rosy picture of your company’s finances as you come to apply for a loan or for finance of any sort but doing so is only likely to delay and slow down the associated application process. Creditors can, after all, always find out what kind of credit rating your company has and how it has been performing over a period of time. So it is better to be upfront and to base your applications firmly in the reality of your financial position rather than any sort of exaggerated or overly optimistic alternative.
4 – Don’t expect too much
At the risk of seeming pessimistic, it is worth being aware that sometimes business loan offers are not what they might initially appear because lenders will often aim to entice potential customers with eye-catching headline rates of interest. Whatever scale of loan you are looking to apply for, it is very important to read the small print and to be certain about what the terms and precisely what kind of a loan deal you are in the running to receive. It could be that there are more than a few nasty surprises buried in the terms and conditions.
5 – Investigate crowdfunding
One area of the alternative finance industry that is really taking off at present is called crowdfunding. You may have heard of a few success stories in this context and wondered if it could possibly have potential for your small business but the service and the sector is shaping up to become a key finance facility for startups and for any company keen to scale-up their operation quickly. The process can function as a means of selling equity on a small scale but it can also serve to facilitate crowd-sourced loans of various sizes and on terms specified separately with each new deal.
Getting good advice
Whatever you position is with regard to the small business loan application process, it can make a big difference for the better to get clear and upfront advice from experts in the field who can guide you around the pitfalls and help pave your way to the financing you’re after.
Guest Post by:
Mark Halstead is from Red Flag Alert, part of the Begbies Traynor Group, and is now in his 10th year with the business. He’s worked at companies across the financial services industry and is a fellow of the Institute of Sales and Marketing.