A Guide to Business Loan Interest Rates

By: Paul Raymond0 comments

Any venture with a poor or no funding source will undoubtedly succumb to its debts. Business funding is the fuel that runs most firms, and as an entrepreneur, you need to know the different options you can use to attain funding. Getting business loans from banks can, however, be difficult especially if you are a startup with no track record but many lenders are willing to partner with small businesses as long as you have a good credit score. Whether you are seeking financing to increase your working capital or for maintaining your operating cash flow, you will have to consider a lot of factors before deciding on which financing option best suit you.

These 8 factors will help you determine the why, how, when, where and what of your financing needs:


 1. Your ultimate business goal and milestones

Investors love ventures with potentials. What is your vision? Where do you see your business in the next five or ten years? Show some excitement for your business and let the investors see it. Back up this vision with a solid business plan.

Stipulate your financial and non-financial goals. Know how much funding you need and how you plan to use it. Let investors see the potential of your business in the long run as this will go a long way in helping you secure financing.


2. Know the financing options that best suits you

There are various funding options like borrowing from friends and family, bank loans, venture capital (where an investor funds you in exchange for business equity) and even bootstrapping. If you are a business doing research and development, you will qualify for government grants. Know what works for your business and go for it.


3. What value are you providing to your customers?

Businesses are about providing solutions. Is your venture solving a problem? How valuable is your solution to the customers? Investors need to see this. For you to get business funding, you need to study your clients’ needs and seek to fulfill them. Show your potential investors that your company can meet the needs of your market. Prove that your services will offer real value and you need to show this through customer reviews.


4. Define your product target market

This step will help you to tailor your products to fit the needs of the particular market you plan to serve. There is nothing worse like launching the wrong product for the wrong market. Investors will weigh the potential of your business against the market it serves. If your business is too niche, they will see it as a venture that will comfortably sustain your lifestyle but cannot make them any money. Don’t target a huge market either because it will portray you as wanting to do everything which may be difficult.


5. Give your business your all

Potential investors need to see that you are investing your resources in the firm. You have to make sacrifices for your business not only financially but give it your time. They will be impressed to see that you care about the success of your business and are doing everything to make it work out.


6. Consider the pros and cons of each financing option

Each financing option has its benefits and pitfalls. Before considering any option, you need to understand what you are getting yourself into entirely. If you opt for venture capitalists, you are giving part of your company’s equity. Banks have penalties for late repayments. Understand these penalties well and any other charges involved. If you decide to seek business funding from family and friends, put strategies in place that will cushion you from any uncertainties.


7. Assess your potential to service the debt

You need to know your ability to repay your loan. What is your cash flow? Is it enough to sustain monthly repayments? Knowing your ability to pay off your loan will help you determine the amount you should borrow. Defaulting on loan repayments will attract penalties that may lead to you losing your business and valuable assets. Always have a plan in place.


8. Negotiate well

Be smart in negotiating a fair deal. Knowing your leverage will help you sell your business concepts well and get the right investors for your business. Go for a win-win situation so that your business does not end up failing due to wrong financing decision.


All the above factors will help you make the right decision. You can also talk to a business coach to help you decide which funding options suits you best.


What’s Next?

Call us today and let our business experts help you find a funding option that best suits your company or business.

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