By Analytix Editorial Team
Finances are the backbone of a small business. Whether the business requires cash to get started or investments for growth and expansion, a small business needs to have a financing plan. Ideally, anything related to cash, financing and the budget should be inherent in the business plan, as well. Most small businesses will require financial assistance at some stage in their lifecycle. However, small businesses need to fully understand that any type of financial assistance needs to be repaid. Therefore, financing options warrant careful consideration prior to applying for it. Here is a quick checklist of questions that business owners need to ask themselves before seeking financing.
Qn. 1 What shape is your business in?
The current status of your business, whether it is in transition or already established, will impact whether or not you receive financing. Businesses that exhibit growth are better positioned to receive financial assistance. Furthermore, the reason why you are applying for financing will need to withstand scrutiny.
Qn. 2 Are your current financing sources depleted?
This should be your first step. Check your current savings account level. Is it on the verge of drying up? In addition, you will also need to check your books and receivable balances. Do your customers owe you money? Is there an overdue debt that you can recover? Do you need to manage your cash flow better?
Qn. 3 What is driving your need for financing?
Is it for some immediate expense? Or can your expense wait? If the need can wait for a limited period of time, this provides you with the opportunity to investigate options at lower rates and better terms. When you are in a cash crunch, you are more inclined to accept more costly financing with higher interest rates for the sake of expediency.
Qn. 4 What is the nature of your need: Expansion or short-term protection against risk?
If you need money for expansion and have a well-defined plan for it, you could proceed with financing assistance. On the other hand, weigh the risk carefully. Any financial assistance could turn into a burden very quickly if it is not followed up by the expected growth and increase in revenue.
Also, the greater your risk, the higher your chances of reaching out for financing with less than favorable terms.
Qn. 5 How does your industry look?
After taking a closer look at your business, you should assess industry trends. Does the industry they show growth or is it in a state of flux or even struggling? Financial assistance could be affected by industry trends, even if your own business is actually in a state of growth and expansion.
At Analytix Solutions, we help boost business profitability through effective accounting and better management of business finances. For more information on our services, please visit us at http://www.analytixaccounting.com or email us at [email protected].