3 Mistakes Business Owners Make When Applying For Finance
Mistake Number One: Thinking your own bank is the only option
In a recent survey of business owners, one of the questions was: “who would they approach for business funding”? A whopping 70% of respondents said they had never considered funding their business from anywhere other than their own bank.
The problem then becomes of course, what if the bank says no? What happens then?
You see, whilst your own bank may have supported the business in the past, remember they are only one option, and may not necessarily be the best option for your funding requirements at this precise moment in time.
As the statistics clearly demonstrate, there is still a belief amongst business owners that their own bank is the best and only option. But these days, nothing could be further from the truth.
Challenger banks, peer-to-peer lenders, crowd funders, specialist lenders all offer a variety of different funding products. All you need to do is discover which funding option will best suit your needs.
The latest statistics suggest there are now over 300 lenders of various “shapes and sizes” who are all offering funding to the SME sector. That means a mind-boggling array of options.
So, choose carefully. To be sure you are getting the best advice, why not use a commercial finance broker to help you identify what funding options exist and which one will best suit your requirements.
Just make sure the broker you choose is FCA authorised and regulated and that the broker is ‘whole of market’ – in other words, they’re not constrained by a panel of just a few lenders, but rather can go out to the whole market and find the best funding option for you.
Mistake Number Two: Not being “deal ready”
What do I mean by “deal ready”?
I speak to lenders all the time, and one of the biggest complaints they have is that when they see enquires for funding, they are not “deal ready”.
In other words, the business owner:
- hasn’t provided all the information
- or hasn’t provided the right information,
- or the information that has been provided has vital bits missing.
Whatever the reason, as you can imagine, it can be very frustrating for a lender trying to make lending decisions.
They result is of course, that the lender must go back and forth to the applicant asking for the information that is missing.
Time consuming and very frustrating.
So, before you decide to apply for business finance of any kind, make sure you are “deal ready” – don’t send your application for finance in to the lender in “bits and pieces” but rather have all the information you will need to hand and then send it all to the lender in one go.
Mistake Number Three: Don’t try to hide information
You may think this is obvious, but you’d be surprised how many times I see funding applications and when you start to delve into the application, you realise the business owner hasn’t provided everything, and that in fact they’re trying to hide negative information.
Believe me, in this internet age, nothing stays hidden for very long. If you’ve had problems or difficulties in the past, say around your credit file, it will be discovered.
A far better policy is to confront these issues “head-on”. Tell the prospective lender everything on day one – the good, the bad and the ugly.
It shows the lender you are being completely open and transparent about your business, but it also gives you the opportunity to demonstrate that you have learnt from past difficulties.
There are of course other mistakes business owners make when applying for finance, but these are the three common ones that I see on a regular basis.
So, to summarise:
- Don’t be over reliant on your own bank, remember there are lots of alternative funding options.
- Make sure you are “deal ready” – have all the information in support of your funding application at your fingertips and ready to go.
- Tell the lender everything they need to know about your application on day one – the good, the bad and the ugly. Don’t try and hide information.
Avoid these three common mistakes and you give yourself a head start when it comes to raising business finance.
And if you’d like to find out more about raising finance or you want to talk to us about your specific requirements, give us a call on 020 8949 2122 or email us at firstname.lastname@example.org