It’s one thing for a business to fail because they don’t offer a product that people want. Things are much worse when you fail simply because you don’t have enough cash. Unfortunately, 29% of business failures happen because of cash problems.
Oak Financial Planners Perth suggests that small businesses need to have a one, two, and five year plan around how their finances will look. Working alongside an accountant or financial advisor can be the guidance needed to ensure that your finances stay in order as your business grows.. Keep reading to learn five common financing mistakes that will ruin your finance strategy.
1. Ignoring Hidden Fees
Some of the financing options you find might seem too good to be true when applying for business loans. It seems that way because they usually are.
When you get great terms, you need to be aware of any hidden fees included in your terms. Make sure to ask your financer about any fees that you’re responsible for. You don’t want to be stuck paying these fees when paying off debt in the future.
2. Not Shopping Around
You have more options for financing than a regular bank. Many companies make the mistake of going to the company they bank with and sticking with them for a loan. You miss out on better terms if you go down this route.
Ask for terms from as many lenders as you can. Even a small decrease in interest rates can save your business a lot of money in the future.
3. Waiting Too Long to Apply
It might not seem like you need financing if your business is doing well. If you can pay for everything with cash, it doesn’t make sense to have credit available. However, things change when you can’t afford new growth opportunities or face unexpected challenges.
If you need to rush your finances, you might end up with worse terms than you would otherwise. Get your financing in order early so that you can get better terms.
4. Lack of Insurance
Lenders want to work with safe customers when they shell out their money. They don’t want their cash to be used on expenses that aren’t necessary. That makes insurance critical if you want to work with a lender that provides your company with good terms.
Having business insurance means that your company can handle an unexpected disaster. You’ll be a safer bet for lenders, so you’ll find more loan options.
5. Not Getting an Expert Opinion
There is a lot of financial software out there that makes it easy to handle business finances yourself. While this saves you from hiring someone full-time to handle your books, it’s still possible to make mistakes.
A lender will want to see financial statements that aren’t full of errors. Make sure you use an expert service like this accounting service to check everything over. They’ll find any mistakes and make sure you’re ready to submit your finances to lenders.
Don’t Ignore the Common Financing Mistakes Above
You can’t mismanage anything when you try to get financing for your business. One mistake will cause lenders to turn away your application before you get a chance to prove your case. Avoid the common financing mistakes above if you want to increase your chances of getting financing for your company.
If you have your business financing strategy in place and are ready to start growing your company, head back to our blog. Our latest posts will help you learn how to get new customers.