At The Commercial Finance Group, we’re passionate about enabling small businesses around the world to reach their true potential. There is nothing more frustrating than to experience a lack of much-needed growth or expansion due to cash flow issues or an overall lack of capital. What The Commercial Finance Group does is provide small businesses and other business ventures with effective loan solutions in the form of asset-based loans, receivables financing and factoring services. With offices in Atlanta, Burbank and Los Angeles, we’re sure to have a financial solution that works with your specific needs.
Many business owners are very quick to hop on a loan that provides them with the capital that they need to continue their business practices, but what they don’t do is thoroughly consider any potential negative consequences of the loan in question. Today, we’re going to focus on some of the recent common small business loan mistakes to give our readers a better idea of the do’s and don’ts of business loans. While this isn’t the ultimate loan guide that applies to every single type of business owner, there are some useful tips to adhere to regardless of what industry you work in. Continue reading below to absorb some of this important information.
First Things First: Credit Cards
This tip applies to everyone and anyone who’s ever had a credit card: don’t max out the credit card. Maxing out your credit limit on your card is a bad idea if you hope to get business financing. Plus, piling up all those major expenses on your personal or business credit cards will only lead to higher interest payments. It’s just simply not worth it.
Also, don’t forget that not being able to pay back your credit card bills will only lead to damage to your personal credit score and business credit score. If you need additional loans in the future for whatever reason, your damaged credit score will only make it more difficult to get another loan.
Have Your Information Ready
When a lender requests information in order to get you approved or started on a loan, they really appreciate it when the client actually has everything together. In other words, you should be prepared when seeking extra capital for your business. Not only is it more professional to have all of the request loan information ready in time, but it will also help process your loan more quickly.
Pay Attention to the Fine Print
On any loan you or your business is considering, you’re going to need to read and thoroughly understand all of the fine print. It may be a somewhat lengthy and tedious process, but understanding the exact terms and conditions of a loan contract is essential to maintaining a good credit score and being able to pay back everything on time.
Borrowing Just to Have Extra Cash
Getting a small business loan should not just be for the purposes of having an extra cash safety net. While having a nice, large sum in your business checking account might seem nice, the frivolous spending of these funds will leave you in more debt than you originally started with. This is why it’s so important to allocate your loan funds to specific business-related purposes.
Going Straight to Big Banks
As we’re sure you’re aware, banks are not the only sources of capital for small businesses these days. Over the past decade or so, there’s been a considerable rise in the number and availability of small business capital from asset-based lenders, receivables financing companies and factoring companies like The Commercial Finance Group.
What many small business owners do is default their loan sources to a big bank, when they didn’t bother to do any further research to see if they could find a better loan provider. A specialized small business loan provider should work directly with you to provide customized lending solutions that understand and meet the needs of your business operations, day in and day out.
Keeping Messy Financial Records
When accounting tasks get put off for too long, this leads to keeping incorrect records, which then translates to getting the wrong loan, or even getting outright denied for the desired loan. It’s quite difficult to go into a bank or small business lending provider to get a loan if you’re not even clear as to what the financial status of your company is.
Basically, if your business can’t keep its current funds in order, then your lender will naturally have serious doubts about providing you with additional capital in the future. If you’re having a lot of difficulty with accounting, there are a number of cloud-based accounting apps that you can integrate with other software tools that you may already be using at your company.
Missing Payments
This is a pretty obvious one, but also very important. Not only will a series of late payments (or even one late payment) make you look bad in the eyes of your small business lender, but they will also rapidly begin to accrue penalties, fees, and so forth. If you fail to make payments, the payments that you’re supposed to make on your loan will begin multiplying – not good!
When it comes to the possibility of acquiring future capital, failing to make payments will also severely hurt this.
Not Knowing How to Use the Loan
Though it sounds surprising, a lot of people will actually borrow money without having clear intentions as to how they’re going to specifically use the funds. Most people don’t get too far in the loan process if that’s the case, however, because you’re probably never going to get a loan if you don’t have a clear idea of how the funds are going to be used. So, before you even begin to think about that cash flow boost, figure out what you’re going to do with it first.
If you clearly define that your capital funds are going to much-needed items or expansion for your business, you’ll be more likely to get approved for a loan. Buying unnecessary, fancy office equipment or putting your money toward things that aren’t practical qualifies as not knowing what to do with a loan.
Give Up on Getting a Loan
For many business owners, sometimes it takes a while to finally get approved for that much-needed loan. Don’t give up if you don’t get it the first time, or even after the third time. If you’ve managed to follow some of the best practices when it comes to small business loans, then you’ll eventually find a lender who can help your business out.
We Can Help Out
The Commercial Finance Group enjoys helping small businesses achieve their goals, and we want to assist your business venture if you’re in need of additional business capital. We’re industry experts when it comes to asset-based lending and working capital solutions, so get in touch with us today to take your business operations to the next level. Contact us today!
