The initial phase of setting up a new venture is a daunting task that kept commoners away from small business ventures for a long time. But 2020 surely showed the world a different picture where small business became the pillar of GDP of many nations.
With the global pandemic causing a massive structural change in the working principle of business modules worldwide, there is a huge influx of small businesses in most parts of the world. Having said this, starting a small business is not an easy task. From creating a customer base to the launching of the products, choosing the right expense tracking software, and financing the entire process, all these require financial backing besides the manpower.
Creating a plan for a business loan
A small business loan is an excellent proposal for new entrepreneurs in the world of business. However, being eligible for receiving this loan is not a very simple option. After all, no one will sponsor a venture willingly unless they know that the money will be utilized well and give a good return.
This is why a concrete plan needs to be presented with every small detail mentioned in a very distinctive manner. The steps involved in creating an iron-clad small business loan proposal include
Consult an expert
Specialist startup and small business consultants understand the market requirements and technical aspects of every venture well. They charge a hefty fee to provide a “no sugar-coated” opinion about the viability of the business and its possible position 5 yrs down the line.
What many do not know is that each day over a thousand ambitious ventures are launched worldwide. A tally of the expense tracking software data of the past decade has shown that only 70% makes it through the year and around 5% last post the benchmark of 5 yrs.
In addition to giving a clearer picture of the credibility of the venture, the consultant also provides detailed knowledge about some of the key aspects that most new entrepreneurs do not consider.
Some of the important factors a consultant discusses and assists in include the insurance policies, legal frameworks, documentation and licenses, the best billing app for small businesses, and financial aid viabilities.
Checking for an alternative viable small business loan
It is not a wise decision to rely on a specific single financial aid option. Financial backing is a crucial necessity without which no small business can last through the initial period of building the clientele base and breaking even.
Alternative backup is also a very important pointer. Though loans based on collateral are the most viable option, it cannot be the most intrinsic choice for many. This is where other choices come into play. This alternative financial assistance for small businesses includes:
Line of credit
Based on the repertoire of a business, a limited fund can be borrowed from a financial institution or bank for a specific time frame. Once the loan is repaid back, the business can once again take a loan and the process of credit and repay keeps continuing.
Time tracking software helps in maintaining the date-specific order of credits taken and repayment along with a scheduled reminder of every transaction happening when one takes a line of credit.
Invoice Financing
Invoice Financing is a good choice for businesses that are just a few months old and has invoice-enabled financial transactions with customers.
Online Invoicing software is one of the easiest ways to keep a track of the funds in the invoice due from the client. Based on the invoice dues one can acquire invoice financing to improve the company’s current asset status.
Term loans
If you have a substantial financial backup to provide as a down payment, Term loans are a good choice. With a scheduled loan payment installment broken down for a very long period of time under a fixed or floating rate of interest, Term loans is a wise choice to provide the initial financial boost, a small business needs to kickstart.
Microloans
This is generally a separate section of the financial help whereas non-profit organizations and Community Development Financial Institutions provide a part of the fund needed for the purchase of various inventories and equipment needed for the operations of the business.
With billing software for small businesses microloan funding of equipment and inventories can be kept in track and the repayment strategies can be penned out in an easier manner:
Business credit card
A personal and a business account should always be separate for better maintenance of the finances, especially credit card transactions. Expense tracking software can help further in preventing personal and business finances from colluding.
This is why a business credit card is an essential necessity. Based on one’s personal credit scores and income, small businesses can acquire a business credit card that provides a larger bracket of fund allowance needed for running a business.
Crowdsourcing
A major contributor in the world of startup and small business financial services, Crowdsourcing or crowdfunding is a donation-based financing process where one presents their entire business plan in front of a panel of investors before being chosen for financial assistance.
Kickstarters and Tencent Holding are some of the best-known Angel Investors/ crowdsource investors who are heavily involved in financing and backing small businesses worldwide.
Create a proper channel of documentation
A business regardless of its size requires a lot of documentation for a loan application. The entire process can be very tiresome and confusing initially. This is the reason why a proper system is to be created.
Advanced expense tracking software can be helpful in creating a thorough record of all the monetary transactions happening in the business. This record of all the necessary expenses will provide the investors with a clear and precise picture of the operational finances of the business.
Personal and Business credit score documents should be checked and updated regularly as most financial aid services rely on the credibility of past transactions.
Business license validity, Tax returns, and IRS clearance are mandated necessities in case you do not want a tax raid or shutting down of the business due to an expired license.
The consumer base is slowly shifting its focus on products that provide better quality and quantity at a much less price compared to conglomerate-based brand names. This is the reason why collaborative efforts between giant industries and small local businesses have been one of the only positive economic attributes of 2020.
The Final Word
Small businesses are going to be the future global powerhouse. However, being a part of this economic boom also means that the business has to be financially sound to battle the competitors and market aggression. This is why small business loans are a key point of consideration while planning the financial backup of a small business.
