Anyone who has responsibility at any level in guaranteeing the continued existence of a business understands quite well how important cash flow is. There isn’t a day that goes by without some expense needing to be met or a new function needing to be added to keep the gears working and the customers happy.
This applies to the start-up venture as well. Having an innovative business approach or product design is all well and good, but neither will see the light of day unless a solid business plan and the financing to back it up are in place.
There are many avenues available to obtain financing for a business. Relevant factors like length of term for loans and amount needed figure in, as do the credit standing and revenue trends of the business itself. When the need for some financial assistance becomes an issue, some serious introspection should be undertaken first before signing any agreement.
When approaching a bank or other lending institution, be ready to answer some tough questions. The health and financial status of a business will be investigated with a fine tooth comb, and budget and sales forecast figures along with monthly payroll and other expenses need to be on hand for the lender to be able to assess the risk. Short-term and long-term loans are very different and require different commitments from both the lender and the business alike.
Taking on a partner or two can be an option, yet this approach has obvious drawbacks. Any prospective partner will most likely be seeking the same reassurances that a lender would, and for the same reasons. Unlike a loan from a bank, however, a partner will likely become more involved in the day to day operation of the business and will also likely want a say in how things are done. This should be considered before a partnership is entered into.
Although business financing by means of credit is also an alternative, it carries many risks and raises additional repayment issues, like interest rates and credit standing. Even in calm economic times this should be a little farther down the list when looking for a hand up with financing.