SECURING BUSINESS FINANCING

It is a fact that bankers and lenders tend to be very conservative.

Have a business plan

Your business plan needs to be realistic, and very detailed. You will need to be able to show your potential lenders everything that they want to know.

Know what you need

It is important that you know exactly what you require from lenders.

Personal credit

You will need to know what your credit score is as it can play a very important role when asking for a business loan.

Thorough follow up

You may need to meet with lenders many times, as they may wish to be provided with further information after your initial meeting.

GETTING YOUR BUSINESS
STARTED RIGHT

It can be intimidating to start a business. Lots of people would be too afraid of failure to embark on this path. But if you have a great idea, and the funds necessary, it may be a good idea to try.

WHO WE ARE

When it comes to business financing, it is often hard for a lot of up and coming entrepreneurs to get the support that they get from actual lenders.

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HAVE AN EXCELLENT PERSONAL CREDIT

You will need to know what your credit score is as it can play a very important role when getting a business loan approved. If it is too low, you may need to spend time increasing it.

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Credit Scores: What do you need to know?

It is an unavoidable part of modern life – credit, loans, debt, and, of course, credit scores. In order to get your dream house, dream car, or even just to survive financial emergencies, such as unemployment or unexpectedly large bills, at some point you will be in need of credit, and for that, you will need to understand your credit score.

Your Credit Score vs Your Credit Report

First of all, you need to get your head around some definitions:

  • Credit Score: This a number you are given which denotes your ‘creditworthiness’, or how likely you are to pay back your loans. It is sometimes referred to as a credit rating, or a credit ranking, and potential lenders use it to determine if they want to lend their money to you. Various data is collected about your past financial conduct, which influences your credit score. This can include:
    • The total amount of debt that you currently owe
    • Any details of your unpaid debts
    • The amount of credit that is currently available to you, such as the credit you have available on your credit card.
    • Information about times you have defaulted on your loans

These attributes are given individual scores, and these scores are added together to create your final, ‘credit score’.

  • Credit Report: Your credit report is a more comprehensive document, and it helps to decide your credit score. It will have the above information and all sorts of other information about your financial history.

You can check your credit report with a number of different agencies. It is recommended that you consider one of the three largest credit reference agencies in the UK, particularly as they each offer a form of free credit check:

  1. Equifax
  2. Experian
  3. Call Credit

However, it is important to note that, while these reports are free, you will often need to pay to see your actual credit score. You may also have to sign up to a subscription to get the free deal, so don’t forget to cancel the subscription before you are charged.

When you are checking your credit report, or credit score, it is very important that you read it carefully. There are a few key things that you should keep an eye out for:

  • Incorrect Personal Information

This information includes your name, you address history, and other personal history. This is particularly important if any of your personal information has changed recently. You may have got married, changed your name, or have moved to a new house, and their records may not have been updated.

  • Incorrect Debt History

Your credit cards, loans, mortgages, and other finances should all be accurate. You should check the details of every single one. There may be a credit card that you have since closed, or a missed payment that you actually paid. It is unlikely that some credit would be missed off the report, but it is worthwhile to mention it, particularly as, if you have kept up with payments, it may well improve your score.

  • Other Mistakes

If there are any other problems, don’t hesitate to take it up with the credit agency. Changing any information on your credit report can take a long time, so it is worthwhile to check everything well in advance of any applications for credit.

What makes your Credit Score worse?

Your credit score is a combination of scores about your financial history. This means your credit score is made worse when your financial history demonstrates you as being unreliable. This could include:

  • Having multiple credit cards, or having access to a lot of credit
  • A history of defaulting on your debts
  • Having a lot of debt
  • Paying council tax, or bills late
  • Being Bankrupt within the last six years
  • Being involved in an insolvency solution in the last six years. Although, the specifics can vary.
  • Missing Payments altogether
  • Having no credit history at all. This may happen if you have just moved out of your parents home, or if you are new to a country
  • Checking your credit score often, or applying for credit often. This demonstrates that you might be desperate, and thus already struggling with debt. You should only apply to see your credit report, or score, when you absolutely need to.

Your Credit Score is not affected by everything. Here are some financial issues that would not affect your credit score:

  • Your Bank Savings
  • Your partner, or spouse’s, credit report, or score. Although, if you have any shared bank accounts, or joint debt, it may be considered. If you are taking out a joint loan, then it will almost definitely be considered.
  • Your Student Loans, unless you have had to default on your loan.
  • Your rent arrears, unless the debt is passed on to a debt collection agency
  • Many people believe you can inherit the credit score of a home you move into. This shouldn’t be the case, and if your credit report appears to reflect this, then you should query the report.

How can you improve your Credit Score?

The good news is there are some things you can do to improve your credit score, although some are faster than others:

  • Make sure you are on the electoral register. This can be the fastest way to improve your credit score, and it works because it allows credit agencies to see you as responsible, and to feel as though you can be held accountable.
  • Take out a credit card. This is only advisable to those who are facing a poor credit score due to a lack of financial, and credit, history. Before you do this, do a lot of research, and only spend what you absolutely can afford to pay off later. The more you prove you are able to pay your credit card bills, the more reliable you become.
  • Put your utility bills in your name, if they aren’t already. This is very similar to the point above. If you are sharing a house with flatmates, make sure some of the bills are going through your account and that you are paying them on time. This will make you more creditworthy.
  • Switch to Direct Debit, or standing orders to pay your bills. This will make it less likely that you will miss a payment.
  • Seek a Debt Solution, such as a Trust Deed. This is best if you have a poor credit score because you have missed many payments and are seriously struggling with your debts. Your credit score will not be improved immediately, and, as stated above, it is important to note that it may make your credit score slightly worse for the years it is attached to your credit report. However, it will help you to pay off all your unsecured debts, allowing you to have a relatively fresh start, without you having to resort to the disruption of bankruptcy. This solution may not be perfect for everyone, so you may want to find out more.

The Importance of Keeping Your Business and Personal Accounts Separate

While a limited company will need to obtain a business account, self-employed individuals and freelancers have the option of using their personal account. On the surface, you could assume that this is the best way, as you have all your expenses in the same place, but nothing could be further from the truth.

If you’re currently mixing your personal and business payments, then it may be worth considering the following options.

Set Up a Business Account

This may seem like a no-brainer, but if you’re currently managing your business expense from your personal account, then you may feel that there is no rush. However, when managing your money in this way, you run the risk of overspending in either department.

Obtaining a business account allows you to separate your business payments, which means that you will have a more accurate overview of each account.

In some instances, a business bank account may be refused, but the main objective here is to ensure that payments are kept separate. As such, you should speak to your bank to see what solutions are available, even if it’s only a basic savings account.

If you’re looking to expand the business in the future, then it’s likely you will need a business account in any event, especially if you’re looking to register the business as a limited company, so why not start now and get used to how a business account works.

Keep Physical Receipts Separated

Just like our bank accounts, it’s important to keep personal and business-related receipts separate, otherwise we could find that there is a lot of sorting out come the end of the tax year.

The system you use doesn’t have to be anything complex. In fact, a couple of shoeboxes is more than sufficient. Simply label each box accordingly, and you’ll find that locating a receipt in the future is less hassle than having to plough through a mixture of unsorted receipts.

Ensure You have a Budget for Business and Personal Expenses

Setting up a budget is the best way of establishing when we need to keep money aside. If we decide to mix business and personal expenses, we could be causing confusion rather than making things clearer. As such, you should look to create separate budgets for both your business and personal expenses to ensure that there is no crossover that causes problems in either arena.

Keeping Expenditure Separate

If we need to make a purchase for the business, but we only have our personal debit card, it may seem like a big issue. However, if we’re not able to keep on top of these payments, the can soon spiral out of control, and before we know it, we’re struggling to allocate payments in the right way, which means both our personal and business finances can be incorrect.

If you have a business account, then you need to ensure that you also have a card so you can make any business purchases directly from the business account. If you’re looking to use credit for your business, then it’s advisable to speak to your financial institution about a business credit card.

Ensure Everyone Understands the Process

Regardless of whether you’re a sole trader or part of a family-run business, it’s important that everyone involved knows the process when it comes to making a purchase within the business. What this system is will depend on you, but if those closest to you make a personal purchase with a business credit card, it could confusion when it comes to matching u the payments later.

Consider Registering a Business Mobile Phone

If we already have access to a mobile phone, then it may seem pointless to take out another contract for the business. While a personal mobile can be used in most instances, if you find that your business use is making your personal bills larger than they should be, then it may be a good idea to seek out a separate contract so that expenses can be tracked easily.

If obtaining a second contract is not viable, then it’s advisable to request a breakdown of your bill each month, as this will allow you to highlight business use.

If you don’t want to commit to a contract, then you could opt for a PAYG option and purchase it with a business debit or credit card. You can then just find the mobile with vouchers from the business account. It’s worth noting that PAYG option may not offer the same features as a business contract, so it can be worthwhile carrying out some research as to what suits your purpose best.

Ensure You Keep Fuel Receipts Used for Business

In the perfect world, every business owner would use a vehicle purchased by the company. Unfortunately, if we’re new to the world of business, then it’s likely we will have to use our own vehicle.

If you do own a vehicle registered under the business name, then you will need to ensure that you keep the receipts for any fuel you need to purchase. If you’re using your own vehicle, then you will need to keep a record of the mileage used. It can also be a good idea to keep any receipts just so your records are complete.

Consider Speaking to a Finance Professional

If you find allocating the payments a little overwhelming, or find you just don’t have the time, then why not speak to a financial professional. Of course, there will be a cost for this, but it can be advisable if you’re looking to ensure that all payments are allocated correctly, and you’re getting the right tax relief for your expenses.

Separating our business and personal payments if we’ve only used one account in the past can be time-consuming, but it’s a worthwhile investment of time if you’re looking to add more clarity to your budgeting moving forward.

Starting From Scratch: Top Tips Before You Start Your Start Up

Becoming an entrepreneur is becoming an increasingly popular way to make a living. Being your own boss, and escaping the ‘9-to-5 rat-race’ is very appealing, and it has become easier than ever to do, as the internet allows you to run an empire from absolutely anywhere. But what should you keep in mind if you are considering making this huge life change?

Tip 1:

Don’t quit your day job immediately. The number one piece of advice that entrepreneurs will tell you is phase into being a full-time entrepreneur slowly. Living just off savings is stressful, particularly when you have to spend money on your business, rather than budget tightly. If you have loved-ones who are dependent on you, this can be stressful for them as well.

Start it as a hobby, and build it up from there. The best time to quit your job is when you’ve done all the foundational work, and, most importantly, when you’ve got at least three years personal expenditure saved, with enough money to invest into your own business when the time comes.

Still, it might be a good idea to go part-time, rather than fully self-employed at this stage, if you can.

Tip 2:

Don’t celebrate anything too soon. It will feel like a painful struggle, but getting your initial financial support can be ‘easier’ than getting further financial support, later down the line. This is because initial finances can be quite small, so ultimately, people are willing to part with a small amount, for a possibly huge return, much later. Whoever invests in you at this stage, is investing in you as a person, and it is relatively easy to convince someone you, or your partner, are great – particularly if a proportion of your investors are friends and family.

Your second and third stages of investment are more likely to require hard facts and figures, proving you are, or more likely will be, a success. This is especially hard because you will not actually be in a position to prove this without a doubt. You probably will not have made a profit yet, so it becomes an argument of ‘look how much money I could have theoretically lost, and look how much money I actually did lose!’. Not great. Your friends and family are unlikely to be able to give you a second loan so soon, and you are going to be asking for a larger amount. This stage can cripple a fledgling company.

Tip 3:

When you are asking for your first ever loan, you might think to go to the bank, or a financial investor. You can try, but you almost definitely won’t succeed, unless they are a personal friend.

Your first loan, as we have already alluded to, is much more likely to be friends and family, and personal connections. You can try Kickstarter, and other such funding websites. But it is too early to ask financial institutions for a loan – they will want you to prove yourself first.

It is also important to note that you are going to need to put your own money into the project. This is partly out of necessity, but also because it signifies confidence in yourself. Would you invest in someone who didn’t feel confident enough to invest in themselves?

Tip 4:

Find a co-founder. After everything that has just been said about how difficult money will be, you may think it is madness to ask someone else to join you. This would mean you both need to have savings, and when you do eventually make a profit, it will be divided into two.

But, it looks much safer to investors. Groups are generally more competent and have better ideas than individuals. Maximize this effect, by choosing someone who balances you out. If you have a great product, but no business experience, find someone who does. If your technical skills and understanding of the product are lacking, find someone who really knows what they are talking about during a pitch, and who can fix problems on the spot.

You could even have a total of three founders – but anymore and you are risking ‘too many cooks, spoiling the broth’. There are many examples of creative differences ruining otherwise great companies and ideas – don’t let that be you!

Tip 5:

You probably won’t become a millionaire. Many entrepreneurs go into business, simply to be their own boss. However, many people have romantic ideas of being the next Steve Jobs. It is always possible, but very very unlikely. You should be aware of the reality of being an entrepreneur. Working 70 hour weeks, for, ultimately, a good-but-not-insanely-good income, is not for everyone.

If you are thinking about doing a start-up to be a millionaire, you will be bitterly disappointed. Almost every millionaire success story, is built on a massive, and serious, failure story. And the average person can’t afford to invest money just to fail, in order to live and learn and start again.

Similarly, if you are thinking about doing it simply because you hate your current job – it may be a good idea to think about re-training in another field which you will enjoy, rather than take the financial risk. Education can be a better investment in yourself, than starting a company, so it is worth giving the idea serious thought.

business-tips

Helpful Tips on Securing Business Financing

It is a fact that bankers and lenders tend to be very conservative. They need to make sure that the money that they are lending to people is going to be secure. This is why they will always take note of whoever is the interested borrower. They need to feel confident that the person they are lending their money will have the means to pay it back. They need to know that the borrower will have assets that may be liquidated too if he defaults.

All of these are reasons why is always a challenge for many businesses these days to secure financing for their business. When one does not have a solid track record yet to show to the lender, and if he does not have the time to get an equity built, the lenders will have to see to the business plan to assess whether it will be worth their risk or not. Here are some of the things that you need to do to get a better chance at securing financing for your venture,

Have a business plan

It needs it be realistic, and it needs to be detailed too. You will need to show to a potential lender that you have taken the time to do research and to know the market. You need to show to that you have the expertise needed as well as the right systems to ensure that the plan is going to be properly executed.

You will need to include a projection of your cash flow too for 12 months. It is important to include the best scenarios as well as the worst and the likely ones. Make sure that you also include your resume to show that you indeed have the experience to get this plan executed.

Know what you need

It is important to know exactly what you require from the lenders. Make sure that you are also able to get that properly explained in detail as well as succinctly too.

Be aware of how much it is that you need and what specific things these fund are going to be used for. Find out who long the funds are going to be needed as well as the length of time you intend to pay the figures back.

Have an excellent personal credit

You will need to know what your credit score is as it can play a very important role on the business loan getting approved or not. If you happen to have a low one, make sure to spend time in getting it improved. Among the things you can do is get your bills paid in full and on time. You need to show lenders that you are proactive when to comes to getting a how edit score repaired, so you get to have a much higher chance of approval.

If you ever have red flags in the history or your credit, make sure that you can explain why. You need to be able to show them steps that you are presently taking too to get that repaired. If your credited history is quite limited, it would be a good idea to get a credit card. Make sure to pay it off in full as well as on time so you can use it as a way to build your history.

Do a prompt and thorough follow up

You may be required to provide more information after you have an initial meeting with these lenders. Make sure to have all the information they need ready so you can supply it to them in no time. If there are negative results, do not hide it. Always be forthcoming and practice full disclosure to make sure that these are details that will not be used against you in getting the approval.