Whether you are starting a business, expanding, or have just been awarded a new contract, financing is necessary for growth at any stage of a business. While you may not need funding today, circumstances can change rapidly. Here are a few things to keep in mind to be prepared for financing your business.
- Check your Credit
What is your credit score? Are there any inaccuracies? Do you have recent late payments? Are you maxed out on your credit cards? What steps can you take over the next few months to improve your credit score before applying for a loan? A strong credit score shows financial responsibility and is a lower risk to lenders.
- Record Keeping
Have you been maintaining proper accounting and administrative records? Do you review your bank account statements and monthly expense budget routinely? Are your business licenses up to date? Accurate financial statements verify the value and growth potential of a business.
- Business Plan
Do you have a clear strategic plan for growing your business? Based on trends in your industry what does growth for your business look like? Is it adding an additional product or service? Is it increasing marketing or adding staff? It is important to outline your goals for the business and the action steps to achieve them.
- Research Funding Options
What is best for you and your business? Is it a line of credit for short term operational expenses or a term loan for equipment financing? Make sure to consider all available financing options.
5. Financing Costs
What are the costs related to the financing? What are the closing costs? Is there a prepayment penalty fee? What is a reasonable interest rate? Make sure you know all the costs associated with the financing so you can accurately compare options.
Obtaining financing can be an involved process. It is best to prepare in advance otherwise your business could find itself suddenly needing to secure funds and the only option available is a high-interest, short-term lender. Even if you are not ready for traditional bank financing, that does not mean there are no other viable options, such as the Miami Bayside Foundation (MBF). MBF is a nonprofit organization whose mission is to further economic development for minority and women owned small businesses in Miami.
This column was written by Joann Milord. Joann is the Black Business Loan Program Manager at Miami Bayside foundation. You can reach her at joann@mbf.miami or 786-703-5768. For more information, please go to www.mbf.miami. Check out some of the small business owners MBF has worked with.
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