8 Questions to Ask Yourself before Applying for Business Financing

These days, there are more resources available for business financing – from bank financing to debt investment financing. But while the options exist, receiving funding is never easy, especially if you are part of a small business. Then there’s the evaluation bit. Financial institutions and investors review your application thoroughly before they can deem you worthy and disburse the necessary funds.

Obviously, you want to maximize your chances of financing approval. Ask yourself these question before you prepare your application:

1. Why do I need business financing?

Every business financing consideration should start with this question “Do you really need more financing?” Without a doubt, there are many excellent reasons why business financing would be beneficial: maybe you are planning an expansion and need more funds to make it happen, perhaps you need to purchase equipment to improve your product, maybe you need to buy more inventory from your supplier, or maybe you just need an injection of working capital.

Feeling unsure whether or not your “why” passes the test? Here’s a good rule of thumb: ask yourself if the business funds will make your company grow. If the answer is yes, go for it. If not, you may want to reevaluate company priorities.

Remember: whatever your reasons are for a business financing application, your investors will question you about it. Make sure you can explain your reasoning eloquently.

2. How much money do I need?

Do your homework to make sure that you ask for the right amount of funding. If you are buying equipment, research for the cost. If you are expanding your business, create financial projections.

Asking for too little will create cash flow problems and may make your company financials suffer. Asking for too much makes you look as if you haven’t done the necessary research. Investors may even think you lack credibility and experience.

3. How are my financials?

Any sensible financial institution or investor will want to know if you can make repayments. So make sure you have a healthy cash flow and solid financial figures.

It’s very likely that you will be asked for your company’s balance sheets, income statements, cash flow statements, and bank statements so that your lenders can assess the financial health of your business.

Take the time to create accurate projections. Try to create a debt repayment plan as well.

4. Do I have other obligations?

Related to number 3, investors and financial institutions will want to know all about your credit history. They want to ensure that you can repay the money.

5. Which financial institution is most appropriate for my financing needs?

Take the time to choose a financing product that best suits your needs. Research various product structure, interest rates, etc. There are different products for different needs. Banks provide financing that is longer-term and with higher amounts. Debt investment financing provides a quick process all the way – from a faster application process to the ability to raise financing within days, maybe hours during the process. Debt investment financing is also online-based, enabling applicants to apply anytime and anywhere.

6. Do I meet my investor’s requirements?

Business financing applications go both ways. While you need to choose the most suitable financing product for you, it is crucial that you meet all the requirements. Otherwise, sending an application would be a waste of time.

7. What’s my business plan?

It’s very likely that you will be asked for a business plan. Investors and financial institutions will want to know details on how you will use the financing money, what your future plans are, and whether you will ultimately repay your obligations.

A strong business plan should include past and current financial statements, along with future projections. Other elements you may want to consider are company and product description, market analysis, and company strategy for growth.

8. Do I have all my documents in order?

If you have all your documentation ready, the application process will be much smoother. You will also look prepared.

While required documents vary across different financial institutions, you will be asked for company financial statements. In addition, you may be asked for your credit report (personal and/or business), tax returns, bank statements, collateral information (depending on financing type), and legal documents (business licenses and registrations, articles of incorporation, etc)

Ultimately, applying for business financing is all about preparation. Good luck!