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While lending may not be as tight and complicated as it was before, but the process is still quite delicate. Small to medium enterprises or SMEs find it hard to get financing from banks since they are relatively clueless about the process. The key is to never stop and be persistent. Here are some important lessons on bank financing:
- You may not need it. The most crucial step is to figure out if you really need financing. Furthermore, you have to make sure what kind of financing is right for you. Businesses without the cash flow that can support regular interest schemes, but expect high growth in the future may benefit more from equity financing. Sometimes, making a loan will only give your company unnecessary expenses, but if your business needs funds for real estate, new equipment, or expansion, you probably need to apply for financing. The best chance to be awarded financing is to think like a bank. Proving that you have the capacity to earn the funds required in repaying your debt and that your business is stable are crucial.
- Have the ‘perfect’ pitch. Applying for bank financing usually includes pitching a comprehensive business plan, laying out your company’s financial statement, plus no less than 3 years of personal and business tax returns.
- Know your alternatives. Don’t place all your hopes into one option. Consider alternatives. Send application to multiple banks for higher chance of landing a finance loan. In case all the banks you’d applied to decline your application, there are still other options, such as private investors and online lenders. However, most of them charge higher interest rates, so you have to be really careful.
Getting finance assistance is not an easy task. To give you the best possible chance, try following this advice. Be prepared. Try your best to set your business apart from the others. This way, you will attract the bank’s attention, which may lead them to lend you the money that you need.