Three Steps to Cheaper Financing
Sooner or later, most businesses need to turn to external sources to finance growth; whether it’s to invest in new equipment or machinery, to purchase property, upgrade technology, or even to maintain cashflow whilst a new product line kicks in. The cost of external financing can be considerable, and keeping it down is a key element in maximising your profitability. So; have a look at 3 ways we have chosen to find cheaper financing.
1. Plan Ahead
Plan your financing requirements well in advance – if possible, as much as a year before you will need the funds. This gives you enough time to prepare a robust application, shop around for the best provider, and negotiate the most favourable terms. If you left your planning to the last minute, not only will you limit your negotiating power, you might also give the impression that your expansion plans are not very well thought-out. Obviously, business owners need to be agile and respond to opportunities quickly, but this doesn’t change the face that quick money is invariably expensive money.
2. Make the lender bid for your business
Once you have a well-prepared financing plan, approach a number of lenders, and ask for them to submit a proposal. These days, banks are used to having to bid for your business. But don’t just focus solely on the cost – consider factors such as the quality of the working relationship, how much experience they have in your industry, etc. Use your track record to try and minimise charges; don’t forget, the main concern for lenders if the degree of risk involved. If you have a good track record, you may be able to negotiate cheaper charges.
3. Ask for more than you need
Many business owners are too modest in their funding applications, fearing that if they ask for too much, it will decrease their chances of success. But it is much worse to underestimate your requirements. Returning a few months later to ask for more on top of your loan will not only start to ring alarm bells about the reliability of your business plan; it is also a lot more expensive to process two applications rather than one.