There are many financing and lending options, which for many individuals can feel like a jungle. But just because you become a business owner doesn't mean there are fewer options.
As a start-up, it's a good idea to sit down and think about what you need and what would be great to have.
Cut to the bone
We all know the terms need-to-have and nice-to-have. Even when you're starting a business and money is tight.
Therefore, start by sitting down and assessing what is critical to get started.
Once the essentials are listed, it's easier to start prioritizing what's next and improvements to the essentials.
What funding options are available?
There are a myriad of options for financing both the start-up and development of a business. You can read about just some of them here, including their pros and cons.
There are three main options: investments, loans or savings.
Savings are self-evident, it's always possible to look at whether you have savings or if it can wait, as long as you have time to save for it.
With both investors and loans, you need to be clear about what you are willing to pay for the money you need.
When investing, it may also be possible that the investor has knowledge or a network that can help you move in the right direction.
Today, taking out a loan is easier than ever before. And the online options are growing all the time. So be careful and critical. Taking out a loan outside the bank can make sense, it all depends on what you need the loan for and how you plan to repay it. If you are not realistic when you take out one of these loans, it can quickly become more expensive than the additional revenue you would ideally like to bring in. Therefore, always borrow responsibly!
How much should you borrow?
If you decide you want to go ahead with borrowing the money, you should start by figuring out if you need all of it or if you have part of the amount yourself.
With loans, you typically pay for every penny you borrow, so it's a good idea to borrow only what you need.
In this context, it is typical to once again go over all of your company's costs, some of them may be able to be cut out, possibly through a bundled solution. For example, you may currently pay someone to handle your social media or have an email setup alongside your website. Is it possible for you to find someone who fits your needs and can do more of these things? And it will be cheaper overall. Typically, suppliers are easy to talk to, especially if you can create a package solution.
Prepare before you borrow money
Whether you're taking out a loan or bringing in investors, you should always start by getting your business in order, so make sure you have your pitch and idea down pat. The clearer it is, the easier it is to convince others that it's a good idea.
Once you have everything sorted out on your end, do a Google search and find out who the investor or lender is. It's always a good idea to know as much as possible about the people you're borrowing money from. If it's a lender and not a traditional bank, always investigate:
- Their reviews - Do they have good or bad reviews, what is typically commented on in the negative ones. And in each of these critical places, the company can help assess whether the reviews should be there or whether they should be removed.
- Loan amounts and terms - Check if the place you want to borrow money can help you with the desired amount. If you want to borrow a higher amount than they offer as a maximum and you submit a loan application, you will typically come across as desperate and out of control. You will therefore be less likely to get a loan. It's also a good idea to look into what other terms and conditions may apply. Find out before you take out the loan what options are available if you should be in the lucky situation where you can repay early. Or if you are in the opposite situation and at some point an unforeseen expense arises that you cannot pay according to the agreement you enter into.
- Loan term - The same as the loan amount. If your needs don't match what the loan provider can offer, it might be worth continuing your search until you find one that fits. If you want a long term due to a large investment, it might be better to spend more time with a traditional bank. Whereas if it's for short-term financing, it may be beneficial to investigate the alternatives.
- Price - Always get more than one quote so you have something to compare. That way you're more likely to find a loan or investment that suits you, your business and your needs.
Now all that's left is to go through the different options.
If you want to learn more about Qred, you can read about us on our website or apply here. We offer flexible business loans to Danish small and medium-sized businesses.