Do you have plans to grow or explore an opportunity for your company? Or maybe you want to start or acquire a business? Do you need financing to carry out your project?
Whether or not this is your first application for financing, it is a good idea to know the mistakes other entrepreneurs have made and to learn from them.
At Femmessor, we understand your reality and the challenges you face when making a request for financing, and, like you, we care about the success of your project.
Based on our experience, we want to share the five classic mistakes in an application for financing so you can avoid them.
1 – Underestimating your needs
Applying for financing requires time and preparation. We know that time is scarce for entrepreneurs.
To avoid your financing application underestimating your capital requirements, you have to plan for your needs and create a complete financial arrangement.
There are overruns on almost every project, so you need to include some leeway.
Plus, there is nothing worse than an entrepreneurial project running short of cash and the entrepreneur having to make another application for financing.
Lenders will wonder about an entrepreneur’s ability to establish a project budget. Even worse is presenting a project and saying: how much can I have for it? This shows that the entrepreneur has not taken the time to do the math.
A cash budget (weekly and/or monthly) is your best friend, with complete financial forecasts.
2 – Waiting too long
Applying for financing is not the primary passion of entrepreneurs, so many put off starting the process.
Sometimes entrepreneurs wait so long to apply for financing that they eat away at the business’s working capital, putting themselves in an extremely risky situation.
If a business begins a round of financing when it is short on cash and can’t meet its short-term obligations, it seriously risks having the application denied.
Be sure to plan your application for financing when you have time to do it properly, which will increase your chances of success.
Once again, a draft cash budget allows you to plan and establish a project budget.
3 – Choosing the wrong financial products
There are a multitude of financial products on the market. So you need to take the time to understand and explore the possibilities.
Be prepared to expand your vocabulary to discuss alternatives. Asking questions is better than pretending to understand and accepting any offer you get.
Also, take time to discuss with other entrepreneurs to analyze your needs and compare offers on the market.
4 – Focussing solely on the interest rate
Financial products have many features. It is too simplistic to look only at interest rates when making your choice.
Here are a few examples of features: amortization, annual fees, disbursement fees, early repayment options, support for the resource, a possible moratorium, and fixed or variable rates.
Take time to compare the options and evaluate what is best for you and your company.
5 – Hiding information or presenting low-quality information
Two expressions could sum up this point: it’s a small world, and eventually the truth comes out.
Non-disclosure, or, worse, lying about your business’s situation to obtain financing, is a terrible idea. Presenting quality, complete information for your project demonstrates credibility and helps establish trust with a financial partner.
In short, taking the time to ensure you are informed before applying for financing increases your chances of success. Of course, you need to go through a process beforehand to validate and structure your project. Demonstrating your profitability attests to the ability to repay.
