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Starting a New Small Business with Startup Lenders

Do you have a brilliant business idea that you wish to implement but have no cash to get you started? Maybe you already started but somewhere along the line you got stuck and need some money to resume your operations. Do you need additional resources to develop your business? Well, if your answer is yes, you have probably already identified potential lenders to help you get on your feet. 

Start ups find it hard to access loans from high street lenders. This is because the banks view them as investments that are too risky. However, some lenders do have funding programs for startups where entrepreneurs can access the capital they require. 

Working With High Street Lenders

It is important to know that lenders will look at your idea as an investment. Therefore, you need to communicate the viability of your idea in clear terms, in a way that makes it irresistible to them. It’s all about the numbers; can your idea pay back their money?

Preparing For Funding Application

Lenders are quite strict with startups for obvious reasons: they are not certain that the idea will grow into a successful business. Since there is that uncertainty, it is up to you to convince them of your conviction, but with facts.

The Business Plan

Every start up loan application must come with a business plan. This is a simple document that clearly outlines the business roadmap. It clearly describes the nature and scope of the business, the marketing strategy as well as the projected financial statements.

Market research is one of the most important factors that a lender looks at. This is what determines the viability and profitability of your idea. For starters, what is it that you are offering the public? Who are you targeting? How many of your target clients are able and willing to buy what you are offering at the price you are offering it at? 

Who are the current and future competitors? Will your business still do well even after other similar and alternative products are introduced to the market? What value are you offering your target market? How much will you sell your product at and how long will you wait before you break even? All these questions should be answered with facts and not mere assumptions and ambitions. 

Once the lender is certain that your idea is a good and profitable venture, you can now go through other application criteria. 

Many lenders have online platforms where you can just fill up an application form and send over the relevant documents for review. Some lenders have specific templates that they require their clients to use when writing business plans and projected cash flow statements. Once you are through with the application, you only need to wait for a reply.

When the Loan Is Approved

One of the biggest advantages of working with high street lenders is that every approved application comes with start up business support services. These services can include, but are not limited to:

Business incubation services

Branding and brand marketing

Mentorship

Financial management services

Marketing resources

Expansion funding

Quick Tips When Dealing With Lenders

There are a few things that you need to clarify with the lender. Remember that their aim is to get their money back. Therefore, it is important that you ensure that you are not left dry after you repay them. It is therefore important to consider:

The amount you are applying for

The duration of the facility given

The interest rate charged on the funding given

The repayment agreement (periodic amounts)

Other terms and conditions of the loan

One thing about start-ups is that they may not always grow into multibillion empires. Sometimes the ventures collapse in 3 or 4 years of operation. It is, therefore, prudent to discuss the eventualities that could come with the collapse.

For starters, it is important to discuss how the payments will be made and what happens if the payments are not made on time. Such issues are important to discuss beforehand so that you negotiate a safe landing should anything go wrong.

You also have to decide whether you want a start up business loan or equity. A loan means that you are liable for all the costs incurred, but you are also a beneficiary of all the profits realized. Equity, on the other hand, translates to shared liability and profits. It is up to you to decide which works best for your financial situation. If you are not entirely certain of the best option to go for, you can always talk to a financial advisor. 

 

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Cost Recovery has helped me to a very large extent by helping me create a realistic financial plan for my business. Prior to knowing about them, I was not very confident about taking the first step to start my own business!
By By Lucy Blake
Musicland

Kudos to Cost Recovery and its entire team for posting such in-depth and thought-provoking articles and advice pertaining to business-finance. The articles are well-researched and therefore backed by ample statistics for the benefit of young entrepreneurs. 
By Kate Hyde
Robinson Furniture

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