Most of us look to the bank as the traditional path to receiving business funding.
The global economic meltdown created a change in the way banks conduct business, and whereas the banks are but one funding source out of many, there are a myriad of business funding options available that many of us may not be aware of.In the past, when a bank declined your project funding application, your business would likely be without a suitable source of funding, and your business plan would probably become another statistic. However, the sources available to secure a business loan have never been greater. Yet, at the same time, they have never been so confusing.
The primary reason for rejection is lack of education. You must do your homework and learn how business loans are approved. Before submitting your application, look at it through the eyes of the funder, and ask yourself objectively, “Would I fund this project?”Understand the cost of money is understanding words like ‘collateral’.
Collateral is something you own which has value. Collateral is not something which you own partially, or something which you intend to buy with the funding you expect to receive.
Understand risk and accept that it is the funder, not you, who is taking the risk in lending you money. And whatever you do, do not suggest terms and conditions in your business plan, for this is a sure way to have your application declined.
Access to financing sources is like trying to navigate through uncharted waters without a guide. A lack of knowledge of the funding process, is a sure way to have your application declined. Corporate clients seeking project funding need to clearly identify and understand their requirements.
Whereas pre credit crunch, lenders focused on the merits of the project itself, today they are as interested in you as much as the project. Due diligence is split into two distinct sections. The first being the project and the second being the principal(s) of the project. If you’ve been a furniture manufacturer for over 10 years, for example, and now you seek project funding for a solar energy project, the odds are stacked against you, for lack of experience in that sector.
There are no shortcuts with honesty, no ways to circumvent the process, you have to play by the rules. And funders are highly trained to see through anything that does not comply.
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