Common Mistakes S.A. Businesses Make When They Try to Get Business Funding

All small business owners can agree that when it comes to running and growing their business, cash is king. This applies whether you're launching a new product or service or are an established business trying to stay profitable. When seeking business funding, there are several important factors to consider. Here are some common mistakes that business owners make when trying to secure funding, along with tips on how to avoid them.

Trying to Get the Wrong Kind of Funding
One of the most common mistakes business owners make is not understanding the different types of business loans available. Options include working capital loans, business refinancing, invoice financing, and traditional bank loans. Each type has its own set of advantages and requirements. Before applying for a loan, familiarize yourself with these differences to choose the best option for your business.

Failing to Plan
Before approaching a potential lender, take the time to conduct research and ensure you can meet the obligations you agree to. Know exactly what you want to achieve and why you need the funds. Some lenders may want to know your intended use for the money, while others may not. Regardless, it’s crucial to be clear about how you plan to utilize the funding and how you intend to repay it. Ideally, use the funding for growth-enhancing activities rather than simply addressing immediate financial issues. This way, the funding can help grow your business instead of just getting you through a tough period.

Providing Incomplete Information
When applying for small business funding, ensure that all your business paperwork and financial information are up to date. Your financial records should demonstrate your ability to repay the loan on time. Lenders, such as Merchant Capital, will typically require documents like a lease agreement or proof of property ownership, bank statements, merchant statements, and contact information for two suppliers.

Having a History of Bad Credit
A poor credit history can significantly impact your ability to secure any form of loan, including cash advances. Before you apply, make sure everything is in order to give your application the best chance of approval. Good credit scores are vital for obtaining loans and other credit in the future. If your credit scores are low, there are steps you can take to improve them and put your business back on the path to growth.

Requesting Either Too Little or Too Much Money
While it's wise to limit how much debt you take on, underestimating your working capital needs can lead to a serious cash shortage. Conversely, requesting too much funding can strain your cash flow, as you'll need to repay both the capital and interest. Additionally, borrowing more than necessary will further harm your cash flow.

The Bottom Line
Access to working capital is essential for running and growing your business. Whether you're actively seeking funding or not, it's beneficial to research your options and organize your business affairs. This preparation will enable you to make quick and informed decisions when opportunities arise and help you avoid common mistakes made by many local business owners. To fund your growing business within the next 48 hours, contact Merchant Capital today.