Credit and Finance, Hints and tips
This New Year get fit for finance
Posted on by Katie Hook
Estimated read time: 5 mins
‘New Year new me’, ‘Healthy living starts now’, ‘I will go to the gym’… January the first brings a whole host of New Year’s resolutions and the majority of them revolve around clean living and getting fit. That’s all good and well, but as a small business owner have you considered a similar train of thought for your company?
How about this New Year you get your business fit for finance?
According to chartered accountants and business advisers Howard Worth, the majority of small and medium-sized enterprises (SMEs) spend the festive period trying to cut costs and then consider expansion and exploring new marketing opportunities in the New Year.1
What can you do?
Have a plan for the money – Having a solid business plan is vital when applying for finance. Not only does it give the lender the information they need to base their decision on, it also shows you have put time and effort into preparation and it’s your opportunity to sell yourself as a low-risk proposition.
The Balance2 suggests that key points to cover regarding finance in your business plan are:
- How much money do you need – Work out a realistic figure based on the facts.
- What are you going to do with the money – Is it to start a business, expand, invest in equipment? Be honest and back up your plan up with research and findings.
- When and how will you repay the loan – Realistically how much can you afford to repay per month? Include cash flow projections as supporting documents.
- What will you do if you don’t get the loan – Do you have a back-up plan?
Make sure your paperwork is in order – If you’re self-employed or a company director, you may well have been sorting through paperwork recently in preparation for the impending self-assessment tax return deadlines! So if you are considering applying for finance, now is as good a time as any (while your filing is neat and tidy).
Advice from Barclays3 is to ensure you have your business plan, businesses trading accounts and profit and loss details at the ready when applying for a loan – further information may be required, but this is a good starting point.
Do your homework – At one point a bank loan was the only option available for funding, however the current market is somewhat different.
Of course a small business owner can still apply for a traditional business loan from the bank, but this doesn’t have to be the only option – towards the end of the recession, a wealth of alternative lending schemes hit the market: crowdfunding, peer-to-peer loans, invoice finance and even the Government’s bank referral scheme was announced last year, which provides assistance to SMEs who have been declined finance from big high street banks, referring them to alternative finance platforms.
Whatever your reason for applying for finance, do your research ahead of time and select the best option for you and your business’ needs.
Know what your business credit report says about you – Your business credit score will play a big part in whether your application for finance is accepted or declined, so knowing your business credit score and the factors influencing it in advance can have many benefits.
Specialist products are available on the market which enable business owners to do this, therefore allowing you to see for yourself if you think you will secure that all important funding.
If your score isn’t looking as positive as you had anticipated, not to worry, your business credit report can give key insights into what could be affecting your score.
Be confident when approaching lenders and check your business credit score in advance. Use Experian’s My Business Profile to assess for yourself if you feel you are in a prime position to apply for funding and if not, use the information, assistance and support available to make the necessary improvements and get fit for finance.