Every entrepreneur knows that you have to spend money before you open your business to the public. There are many expenses before the opening day and if you want to make a good impression to your target market, you don’t want start your business in a haphazard way. But, how do you determine the right amount of business loans to cover your startup cost?
Plan your initial financing by taking into consideration the following factors:
Startup expenses: These include the costs for setting up the business, including, but not limited to, the following:
- Business permit
- Legal fees
- Site selection
- Building renovation
- Logo design
- Website design
- Brochures
- And all other expenses you incurred at least a month before you started your financial planning
Assets: How much is the money deposited in the bank, under your startup’s name? You can make an inventory of your assets, such as cash, equipment, tools, office furniture, real property and other short-term and long-term assets.
Financing: This includes both capital investment and loans. The only investments or loan amounts that belong in the startup table are those that occur prior to the plan.
Operation costs for 6 to 12 months: How much money do you need in the first few months while your business is not yet generating enough sales to cover the expenses of your operations? Expect for losses during the early months while you’re still in the process of introducing your business to the public, making connections and building a good reputation.
What is the importance of estimating the startup cost?
If you don’t have a detailed estimate of the costs of doing business in the first few months and the things get bad because you are not making enough sales, you may not be able to apply for a bigger loan.
Impact of Bad Credit on Business Loan Applications
Businesses with stable cash flow, positive payment history, and with a manageable debt load can easily get credit approval. But, what happens to people with bad credit? Is there anything they can do to up the odds of getting their business loans approved?
Lenders use a person’s cash flow to predict financial health and the possibility of getting repaid. The same thing applies to businesses. Lenders prefer establishments that are able to demonstrate steady cash flow because it ensures that it has adequate money to pay them like unlike high-risk debtors with bad debt. That’s why most lenders require financials statements as one of the basis of their loan approval.
But, those with bad credit don’t get the same preference. The rates, fees and terms are often higher than those with good credit.
How to find the best business loan for bad credit
If you don’t have the financial documents that banks require for your business loan application, ALC Commercial can help you. With minimal documentation, we can provide you with the right amount of business loans to ramp up your startup.
Call us today!
