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Is Your Business Ready to Apply for Financing? Check These 5 Things
Your business is ready to apply for financing when you know how much you need, what the money will be used for and how you plan to repay it. It is also a good idea to have your latest financial figures readily available.
Everything does not need to be finalized before your first contact. However, these five things will give you a good starting point.
1. Make sure your financial figures are up to date
A financier wants to know how your business is doing right now. That is why the latest financial statements are not always enough, especially if some time has passed since the end of the financial year.
Have an up-to-date income statement and balance sheet ready. It is also useful to gather information about your existing loans and other financing in one place.
If something out of the ordinary has happened in your company's finances, be open about it. For example, a temporary decline in sales may be due to seasonal fluctuations or the postponement of a major project.
2. Calculate how much money you need
It is worth applying for financing based on your actual needs. Estimate how much money you need and when it needs to be available for your business.
If the financing is for an investment, remember to include not only the purchase price but also costs such as installation, commissioning and other expenses. For a large order, you should also account for materials, wages and other expenses that arise before the customer makes the payment.
Applying for too little financing may not solve the situation. Applying for too much, on the other hand, can result in unnecessary costs.
3. Clearly explain what the money will be used for
The purpose of the financing could be, for example, purchasing a new machine, replenishing inventory, growing the business or completing a large customer order.
Explain as practically as possible what your business will do with the financing. A clear plan makes it easier to find a financing solution that suits your needs.
A good explanation can be simple: the company needs 50,000 euros for materials now and will receive payment from the customer in two months.
4. Consider how the financing will be repaid
The financing should fit into your company's everyday finances. After the monthly payments, there should still be enough money for salaries, taxes, rent and other expenses.
Make a simple estimate of your future income and expenses. This will help you determine what monthly payment your business can afford and how long the repayment period should be.
If the money is consistently not enough to cover expenses, additional financing may not solve the problem. In that case, it is also worth reviewing your pricing and costs.
5. Choose a solution that suits your needs
There are different ways to arrange financing for different situations. The right option depends on what you need the money for and how long you need it.
A business loan may be suitable for an investment or a large one-time purchase. A credit facility can act as a buffer when the timing of the company's income and expenses differs.
Invoice financing can provide access to funds before customers pay their invoices. Inventory financing, in turn, can help when the company's cash is tied up in products and inventory.
When comparing options, it is worth checking the total cost of the financing and the repayment schedule.
You don't have to figure everything out alone
It is worth starting the financing process before there is too little money in the company's account. This gives you more time to compare options and means you do not have to make decisions under pressure.
The most important things are to know how much money you need, what it will be used for and when your business will be able to repay it.
Konkretia Rahoitus helps clarify your financing needs, compares financing providers and handles negotiations on your behalf. You get business financing suited to your situation, without business jargon or unnecessary paperwork.