5 Mistakes Startups Make When Seeking Business Funding
At one point in life, we all want to ditch our monotonous 9-to-5 job and embrace the prospect of being our own boss.
However, one factor that compels most people with an entrepreneurial mind to put their big plans on the back burner is initial funding to get started.
Financing a startup idea is baffling, but luckily in recent times, governments have eased up their policies for young and bright entrepreneurs.
In this article, we identify the five potential pitfalls when obtaining funding loans and how to avoid them:-
#1 Don’t Equate Funding With Success
Most young entrepreneurs don’t see raising the initial funds as an integral aspect of launching a startup instead of a marker for success. This leads those entrepreneurs to focus all their efforts on applying for a loan without taking into account various factors, such as, what if your business doesn’t start off as per expectations, what if your product rejected by your prospective customer base? Do you have a plan B?
It is of paramount importance to do a lot of thinking to develop a solid startup plan before you file your loan application. Because, another way around, without proper planning, you’ll find yourself in financial trouble.
So, in a nutshell, don’t perceive initial funds as a guarantee for success, instead a medium to accomplish that. You can always seek the expertise of a professional advisor to guide you with fast business funding that helps you start off your dream venture.
How To Avoid This?
Think long and hard how much funds you need to turn your business vision into reality. Just remember you need millions of dollars as an upfront investment to get started, so decide the loan amount wisely.
#2 Not Fixing Your Personal Credit Score
A credit score is an essential tool used by banks and independent money lending firms to determine the borrower’s credibility. If your personal credit report lacks past diligence in paying off the debts, then your odds of rejection become real.
Your personal credit score can act as a barrier to your entry into the business world.
Getting a startup loan when your personal credit score number is below 700 is tough unless you opt for unsecured small business loans. This is a magic figure above which the likelihood of approval increases dramatically, and below it decreases substantially.
How To Avoid This?
Before you begin your loan application, know your credit score. If you can obtain your credit score online or reach out to your bank, if it’s below the mark of 700, then take necessary measures to correct it.
If your credit score is still far from the ideal number, consider non-traditional financing options, which tend to pay less emphasis on your credit score.
#3 Too Many Loan Applications
Some entrepreneurs make the most prevalent blunder of filling multiple loan applications, perceiving that they got all bases covered. This way, they assume they weigh several loan offers and pick what is suitable. However, applying for too many applications could prove to be a red flag for the credit bureaus.
#4 Failure to Seek Expert Advice
Before you file your application for a business loan, you must seek the right guidance from knowledgeable and experienced financial advisers. Hiring an accountant can assist you with your startup fundraising for both short & long-term goals.
It is highly recommended to seek financial advice from your business networking groups.
#5 Failure To Do Market Research
Finding the right lender seems so daunting that most people end up inking the contract with the first company they come across over the Internet.
But, blindingly trusting one lender without weighing your options could prove to be costly. Take your time to research the market for top traditional and alternative money lenders and then select what’s best fit for your business.
Financial institutions in a region where you are planning to launch your business are ideal locations for seeking a business loan without any delay.
There are several web portals where you’ll discover an array of business loan options, and your own network of friends & relatives could prove to be handy.
Stay clear of these prevalent startup-financing mistakes, and see your dreams translate into reality with years of hard work and true dedication.
Call us at 703-399-1685 for more information. We provide flexible business loans to startups, on your terms — we believe your business is way beyond the credit score.