SMEs need sufficient working capital for business development. No matter the economic climate, whether it is bright or gloomy, SME owners should always manage their working capital well. Gaining more capital is not easy, however – especially if you were thinking of applying for a loan. The best advice we can give is “prepare well.” Here are some additional steps that will help boost your chance for financing approval.
Build a Strong Business Plan
Lenders and investors always look for a company with a strong business plan. A solid business plan is essentially the most crucial factor in dictating whether your business will be a success or a failure. Investors want to know if you have a clear vision for your business, along with a realistic view of what can be achieved, and strategies on how to get there. Make sure you detail your vision, whether on paper or on an electronic medium as clearly as possible, to persuade lenders.
Provide Detailed Information
Never skimp on specifics when dealing with financial institutions. Tell them exactly how much money you need to accomplish your goal and give them specifics on how you will spend the funds. The more prep and detail you incorporate into your financing proposal, the more your lender will appreciate you. For instance, maybe you need new equipment to optimize your production process. Provide equipment cost, how much money you need to purchase the needed new equipment, and explain specifically how it will help you grow your business.
Share Your Financial Information
Be blunt! Give your lender the financial background of your company, the company’s future growth plans, and even personal financial information if you must. It will allow lenders to gain more understanding on your financial condition. Detailed, organized information and sophisticated documents will illustrate how well you’ve run your business in the past. Lenders will have more confidence in your business’ future and will be more likely to invest in your company.
Understand the Kind of Financing You Need
There is a lot of financing products out there today. Do you want to go with a traditional bank loan? Do you want to try alternatives such as peer-to-peer lending? But most important of all, research the type of financing most suitable for your business. Do you have enough assets for collateral or do you need to look into unsecured lending? Do you need short-term credit or something more long term? List down all your needs and look for an appropriate loan product.
Look for Alternative Solutions
Today, with the rise of financial technology, there are more choices on the market – many of them online-based and easy to use. Crowdfunding and peer-to-peer lending can be especially suitable for SMEs as these financing methods provide fast and accessible financing.
Gaining capital may not be easy, but prepare well and you will optimize your chance for financing approved. Good luck!