How To Start & Grow Your Business

3 Questions to Ask Yourself Before Borrowing

From the Editor's Desk
Jul 22nd, 2015
  • Estimated reading time: 2 min read
  • Hummy's
    Highlights

    1Be able to articulate how you will use the capital. 2Make sure what you borrow will add to bottom line. 3Be able to explain your own financial statements.
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Finance-Approved small business loan application and dollar bills Photo Credit: mangostock Shutterstock

David Gilbert of National Funding helps small business get the capital they need to grow. He tells Forbes.com that “many business owners have a difficult time articulating what the financing they’re looking for will do to help their business—which sometimes makes it challenging to get the financing they need.”

When Gilbert works with small businesses, he asks them probing questions to determine the best type of funding for their company’s current needs, including creative and alternative sources. Sometimes companies discover that what they really need isn’t cash, but something else, such as an equipment lease.

The process can provide self-reflection and a chance to reconsider options. Or, it can help sharpen your focus and prepare you for meeting with lenders.

Before accepting a loan, ask yourself:

1. How will you use the capital?

You should be able to demonstrate to a crystal clear vision of your business model and specifically how the funds will affect your company’s growth. The clearer you can be about this, the more confidence lenders will have.

2. Will the extra capital expand the business?

It’s important to connect the dots and identify where exactly additional funds will produce measurable return on investment. If this is vague, then hold off on borrowing until you can precisely pinpoint how the funds would significantly add value to a vital area of your business operations.

3. What do the numbers say?

You should understand and be able to explain your financials. Get help with a CPA if you can’t figure out what your statements are telling you.

“If a business owner can’t read and understand a financial statement, a profit and loss report, or the other financial reports, it becomes difficult to determine whether or not the business is even capable of servicing any debt,” Kiisel says.

To read the original article in its entirety, please visit Forbes.com.

About the Author

From the Editor's Desk

This article was written by a bizHUMM Staff Writer. We aim to provide practical tips that help solve your burning small business questions. If you have any suggestions or ideas for articles, please email them to: editor@bizhumm.com