Obtaining a Business Loan

Here are 5 tips for when you’re thinking about obtaining a business loan.

1. Plan Ahead

Obtaining a business loan is much easier if you are not desperately needing the money in a short time frame when you apply. It is very important in business to be thinking ahead in terms of cash flow and capital requirements.

It is technically possible for a business to be over-capitalised, but that’s not something we need to explore here. For the vast majority of small and medium sized New Zealand business scenarios, for all practical purposes, you can never have too much money. Or, at least, access to too much money.

2. Research.

Good research always seems to pay off, (even in unexpected ways sometimes). This is certainly true when it comes to obtaining a business loan.

Find out how the business you are in, or planning to be in, is usually funded. You may be surprised at the range of different methods and sources of business finance that are around.

Check out your local agents and providers. Talk to lots of people. Sure, you have to filter feedback and information, but with most things, if you ask enough questions, eventually you’ll find what you need.

3. Network.

Networking is so important in business. It takes time to develop trust and good relationships. Also, you may be surprised who, and how much other people know. It is a strength to seek help. So, join your local Chamber of Commerce, BNI breakfast or similar. Have lots of conversations about business, what you’re up to etc.

Talk about finance. Anybody who is in business will understand about the need to get the finances right. Be patient with your networking. It will be quietly working for you without you even realising it. Eventually, networking will pay dividends for you.

4. Prepare.

The information required for obtaining a business loan is usually more substantial than for a business loan, sometimes significantly so. It pays to keep records in order and have information such as most recent accounts, management accounts, debtors lists, cash-flow projectons, bank statements etc, etc, readily available.

Apart from helping to move things along smoothly, it also helps to give a good impression to the lender/broker/investor.

5. Think Leverage and Added Value

Time is money in business. Using other people’s time (and knowledge, skills and experience) is as important as using other people’s money. One of the most common traps for business people to get into is the penny pinching mentality, especially when it comes to advice and leveraging other people’s skills, contacts and knowledge.

Commercial finance is a very different area to residential lending and personal loans. When considering your options, think in terms of the value that an investor might add or that a good commercial broker or private financier could bring to your business.

Sometimes things which seem expensive are actually adding a lot of value that may not necessarily be immediately apparent.

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