By Ana Sirbu of BlueVine
As an entrepreneur, you’re constantly concerned about an important aspect of running a business: money. You need funds to get started, and you’ll need more to keep afloat and to grow your business.
The good news is you have more funding options today, including online lenders that now offer quick and convenient access to capital.
But finding the right financing for your business can be tricky. It’s so easy to make mistakes. And some of these missteps could cause serious, long-term harm to your business.
Here are three common blunders in business financing. These are lessons I’ve come across in my career having worked with many financial technology and SMB-focused companies in my roles at Capital G (formerly Google Capital), Silver Lake Partners and also the experiences and insights of our team leaders and risk analysts at BlueVine:
Waiting too long in looking for financing
You had to raise capital to start your business. By now, you know that your need for funding will continue and even grow.
You will need capital to make sure you have enough to maintain inventory, to cover payroll, to deal with emergencies and even to pounce on unexpected opportunities.
But many entrepreneurs make the serious mistake of waiting too long before making plans.
My colleague, Stuart Blake, BlueVine’s director of sales who has been helping small business owners with their capital needs for more than a decade, likes to quote an old adage about business financing: ‘The best time to apply for financing is when you don’t need one.’
That’s perhaps the best advice you could get as an entrepreneur. Unless you’re independently wealthy or have investors and supporters with really deep pockets, you need to have a game plan for making sure that you will always have the funds you need to run your business.
Remember that it takes time to apply for financing. Getting approved for a traditional bank loan, especially those guaranteed by the Small Business Administration, can take months.
The approval process is typically faster with online lenders, but you still must be prepared to submit key pieces of information, such as bank statements, incorporations papers, and financing contracts.
Carelessness and mistakes in your application
I can’t stress this enough: you should take the process of applying for any type of business financing very seriously.
I know the life of a small business owner is hectic. Understanding and filling out a financing application form may seem like a chore. But mistakes or incomplete information can delay and even derail your application.
Our risk managers also stress that simple errors — typos in your Social Security Number or your bank account number — can cause problems.
Then there are the more serious mistakes. For example, some applicants fail to disclose that they own other businesses with finances that are intermingled with the business for which they’re seeking financing.
In some cases, the errors involve something very basic: your contact information. Stu Blake, our sales director, says some borrowers put down a general email address or phone number that they don’t actually check regularly. This leads to unnecessary delays in processing their applications.
Not having a clear idea why you need the funds
One of the first things a financing company will ask you is this: Why do you need the money?
Most online lenders will not require you to submit a detailed strategy. But be prepared to summarize your plan and how the financing you are seeking will help you execute it.
Unlike online lenders, you will typically have to submit a business plan when applying for a traditional bank or SBA loan, including details of your financing strategy.
If you show that you have a clear idea where your business is going and why you need the capital you’re seeking to reach your goal, the more confidence a lender will have in doing business with you.
Ana Sirbu is Vice President of Finance and Capital Markets at BlueVine.
The views, opinions and positions expressed within this guest post are those of the authors alone and do not represent those of CBS Small Business Pulse or the CBS Corporation. The accuracy, completeness and validity of any statements made within this article are verified solely by the authors.