Financing a Business: Are You Prepared?

Financing your business can be a daunting task. But when you know what it needs and how to prepare for financing and your options, it doesn’t have to be an overwhelming experience. Whether you are looking to expand or just starting out, understanding the right time to finance your business is key. In this blog, we’ll uncover how to finance a business, when it’s the perfect time to do so—especially for a small business—and discuss some of the most popular financing options.

When Is It Prime Time to Finance a Business?

Before diving head-first into a plan, it’s important to understand when a working capital increase is necessary. When starting out, you’ll need enough funds to cover expenses such as rent and employee salaries. Additionally, you must delegate funds for purchasing assets, supplies, and other necessary operational items.
Proper financing isn’t a “one and done” deal. As your business grows, you’ll likely need additional capital for marketing efforts or inventory purchases—more on this later. Alternatively, if sales stagnate or you encounter unexpected expenses like major equipment repairs, understanding your business finances can help you stay on track.

How to Finance a Business: What You Need to Know

When managing your business’s finances, there are several essential steps you should take.

Gather Your Documents

Before applying for any financial incentive, make sure you have all documents ready. These typically include tax returns from the past few years and a detailed list of expected expenses and revenue projections over the next 12 months. Having them ready will make it easier for banks or lenders to review your application and decide much faster than if they had to wait for them later.

Monitor Your Credit

Another essential step in financing your business is regularly monitoring your company’s credit score. Depending on your financing option and what type of lender you go through, this could mean anything from checking with one of the three major consumer reporting agencies (Experian, TransUnion, and Equifax) at least every six months up until it’s time to submit an application.

As a general rule, keeping your revolving credit under 30% utilization is ideal. This is something that every business owner should take seriously, since even small changes in credit scores can make a significant difference in terms offered by various lenders. By maintaining a steady score, you can save time and money when looking into financing options down the road.

Pinpoint the Best Financing Plan

Knowing what kind of loan or grant works best for your situation is also important. Consider whether you want to apply via a bank, credit union, or even an online lender. Additionally, understanding whether a secured loan is necessary or if there are unsecured options available can help save time and money in the long run.
Overall, understanding your needs is vital. Are you seeking a conventional loan that assists with equipment financing? Is your business capitalizing on renewable energy? All are valid questions to ask.

Whether you need to maintain your current operations or grow your business, Madison One CUSO has an array of government-backed loans for you to choose from.

Business Loans We Offer

What Are My Financing Options?

Depending on the size and scope of your project needs, along with the type of structure that works best with your current financial system overall, several financing options are available.

Some popular choices include traditional lending from banks & credit unions, plus venture capitalist investments and private equity firms offering more tailored solutions. Additionally, for people seeking financing for small businesses, there are initiatives like SBA loans and micro-lending programs specifically designed for enterprises with limited resources.

Growing Your Business—Does It Always Mean More Financing?

As businesses grow, they often require additional capital investments, whether through short-term loans used strategically during periods of high growth and demand or longer-term investments used more discreetly, like buying out partners or employers.

While both come with associated risks, usually via increased interest rates due to the higher risk involved, these deals can often provide much-needed flexibility. This way, businesses can access larger amounts of cash without having to quickly issue liquidating assets unless otherwise necessary.

Business financing should always be done after the careful consultation of an experienced professional, but these solutions often prove invaluable for helping companies achieve specific goals within an acceptable time frame.

The Bottom Line

Financing a business isn’t easy, but understanding what options are available, along with sufficient preparation beforehand, can make the process far less stressful. Whether starting a business or expanding your existing operations, knowing the right time to make the right financial decisions is a recipe for success.

By taking simple actions like regularly monitoring your credit and making a sufficient plan, you can ensure more bargaining power during the negotiation process—setting a wonderful precedent for the future.

Secure the Perfect Business Loan for You With Madison One CUSO

Are you seeking the perfect financing solution for your small or rural business? Consider servicing Madison One CUSO. We’re a credit union-owned company specializing in SBA and USDA commercial business loans for various businesses across the nation.

Financing your business requires careful planning and knowledge of each product, and Madison One CUSO can help guide you through this journey. We provide education on each type of loan, along with best practices for filling out applications. Strong financial health is important, and we ensure our clients have tailored resources to flourish.

Learn if you’re the perfect candidate for our commercial business loan types and contact us today to schedule a consultation with an expert.