Every year witnesses the birth of more than a million new business organisations worldwide. But do they all reach the heights of success?
Simply put, no, they don’t.
In spite of having a well-developed business strategy and good product ideas, not all business start-ups are able to grow or thrive as much as originally anticipated.
According to a survey, it has been discovered that approximately 94% of new start-up businesses fail during the last economic year. The main reason behind this failure is the absence of assets. Even if your business strategy is well developed, but if it lacks the factor of finance you can’t do anything.
Your credit score will impact your financing options
You might be looking for a round of finance to expand your business, but do you know why your personal credit score matters?
Money lenders ask for a personal credit score in order to check how reliable you are with your business funds. It’s just a number, but it makes a big difference when it comes to financing a business. A low credit score can restrict your financing options, so it’s important to have a good credit score. So know your credit score before start hunting for numerous financing options. If your credit score is bad, you should fix it before approaching financial institutions for loans.
Factors to consider
Credit and financial history: Your credit, as well as financial history is considered by your lenders. If you can’t demonstrate your capability to deal with your own finances it becomes hard to secure financing from outsiders.
Diversification of customers: Ensure that you are not relying on one or few customers for your revenue. What will happen if these clients stop using your product or service? You need a different group of clients in order to be successful.
Insurance: Secure yourself from tragic circumstances. In case if you won’t be able to work because of severe injury or you pass away, ensure you have enough life insurance to pay off your obligations to protect yourself as well as your family members.
Below are ways in which you can finance your business:
The simplest way to finance your business is to make use of your own savings. You can save money for a period of time and utilise this cash to support your business. This is one of the simplest and most secure ways to start any business. Only the issue that arises with such kind of financing is that you are restricted by the amount of cash you can spare.
Many entrepreneurs withdraw from their retirement schemes, or insurance policies and make use of those assets to run their business. This is a very risky technique, especially if your business fails you could lose your home as well as your retirement income.
- Credit cards
Credit cards can keep up your working capital as well as the income. Few companies make use of credit cards to pay for office stationary, service bills, travel charges, rebates etc. But, credit cards are straightforwardly attached to your credit score. Failing to make monthly payments can influence your credit score negatively.
So, in case if you opt for a credit card for securing your start-up capital, ensure you have the arrangement to pay it back quickly.
- Micro loans
Micro loans are simply short term loans that have low interest rates. This option is ideal for small business entrepreneurs and businesses with low capital needs. A microloan can extend from $500 to $50,000.
- Seek advice from experienced investors
You should try to seek financial advice from experienced investors. They will tell you how they acquired assets to begin their own particular associations. Also, they will guide you to the best loaning firms in order to acquire a business loan at the most minimal financing costs.
Also, sometimes they can offer you assets to begin your business.
- Funds from family and friends
This is also one of the more popular funding methods that one can use for their business. In spite of everything, colleagues or family members trust you and they know that you will not cheat them.
On the other hand, taking cash from colleagues can destroy your relationship if you are unable to reimburse when expected or there is any misconception with respect to the agreed terms and conditions.
To avoid such misunderstandings, it’s better to carefully write everything down and repay the money as early as possible.
- Network with the right people
Networking with success-oriented people will empower you to fundamentally develop your business. Professional networking is a good option for all kind of businesses and it can also enable you to gain additional funding to begin a new venture.
After completing enough face-to-face networking you can also take the benefit of these networking skills online. You can utilise a crowdfunding site to raise funds in order to start your business.
- Consider taking out a loan
Banks are always ready to assist you during tough times but you need a proper and well-planned business strategy in order to get a loan. A loan can offer you the funds you require to develop your business, but on the other hand, credit instalments and high rates can hurt you if your business is not achieving its objective profit.
When taking a personal loan to finance your business, it’s critical to have a high credit score as all banks and money lenders complete a credit check. Ensure that you frequently check your credit scores if you want to take a loan for your business.
While taking a loan from your lender be careful to read all documents carefully before taking out a loan. For example, In UK numerous financial institutions have mis-sold PPI policy to millions of customers along with a loan. Compensation amounts have crossed billions of pounds for mis-sold PPI and more claimants are emerging with each passing day.
The problem with the majority of business owners is that they don’t think about all the options available to them and usually rely on a single financing option and invest all of their time and energy into trying to make that work. By researching for various other options, one can raise the odds of a securing positive financing.