Running a small business comes with many challenges. One of those challenges can be obtaining financing to enable growth. Whether you need financing for an expansion, new inventory, or to get your business through a cash flow dip, there are a few steps you can take to make your business appear stable and financial sound to potential lenders.
Establish a History of Steady Cash Flow
Being able to prove that your business has stable cash flows is one of the primary qualifications that potential lenders will expect when evaluating a loan application. Having bank statements, tax returns, and financial statements that prove a steady historical income will be a prerequisite for any business loan. If your business financials show peaks and valleys in your historical cash flows, be sure to have explanations for those changes.
Keep Business Debts in Check
Your business’s existing debt and financial obligations will be another large determining factor when applying for financing. Maintaining a manageable debt load can help improve your chances of being financed. Be ready to explain why your business needs this additional funding, and how the funding will lead to increased income for your business.
Establish a Steady Payment History
A potential lender is going to want to see that your business has a history of paying its debts on time. They will likely retrieve information on your business’s payment history from your business’s credit report. However, your business’s credit report may not show your payment history to significant business partners or suppliers. You can help establish a solid payment history by providing potential lenders with references from some of your business’s long-standing suppliers or trade partners.