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Updated: Jun 13, 2023

1. Identify the actual business need

Sounds easy, but many times business owners identify an amount they think will work without analyzing the actual need, which often results in not requesting the proper amount of financing.

2. Cleary define the use of funds

It is crucial for a business to perform a cash flow and cost/benefit analysis to help the business better understand the actual need and clearly define how the financed funds will be utilized. This helps the lender understand how the business will be using the financed funds and the incremental benefit to the business.

3. Understand the timing

When does the business really need the money? Is it yesterday or in 3 months? Proper planning is important to consider in this process, as loan underwriting will (most of the time) take longer than you expect. Unfortunately, a lenders timeline is not always aligned with the business, so plan accordingly.

4. Identify what type of financing is needed

If a business has performed the above steps, it will have a clear picture of what type of financing fits the business need. The private capital world offers many different types of financing options, from short-term working capital unsecured loans to long term collateralized term loans or something in the middle, which is referred to as mezzanine financing. It is important to understand options, as a business may end up securing a costly merchant cash advance, when what was needed was a loan for new equipment. It is strongly recommended using a financial professional to help evaluate the business need along with the various financing options. A business owner should always be concerned and properly manage its capital structure.

5. Understand your financial facts

As an active, operating entity a business should know all its financial facts. The below represents a few of the key items that are critical, but is not all inclusive; personal credit score, time in business, annual revenue (current and historical), gross profit, operating profit, net income or loss, extraordinary items that skew the financial results, current customer receivables, current vendor payables, business assets, business liabilities, details of current loans or advances, entity status, income tax return status, and sales-use or other government tax status.

6. Know your story

A business needs to have a mastery of its financial story. Financial results paint the picture of your business story, current and historical. Financial statements are the reflection of your market, competitors, product/service, ability to manage and deploy assets to generate a profit. A financial statement or income tax return presented without the business story may add an additional disadvantage to the underwriting/approval process.

7. Make sure your documents are in order

Good record keeping is absolutely imperative for the general health of the business and for the hope of obtaining any outside financing. The business accounting records, income tax returns, other tax returns, bank statements, financial statements, contracts, entity documents should all be kept current, in good standing and easily accessible. When applying for financing one or more of the records will be requested.

8. Devise a plan

Now that the business owner understands the business need, financing amount, cost/benefit, timeline, and type of financing that best fits, a roadmap can be created to obtain the funding. Evaluate the financing market, as many traditional and non-bank private funding sources are ready and waiting to hear the story. Make a list, track it properly and ensure you are following up immediately. Response time matters when applying for financing. It is always advisable to obtain help from a certified financial professional to ensure your business is obtaining the best capital possible.

If you are a business owner that is looking for business debt financing and/or have questions regarding your own business’ financial health, we can help. At CSA Capital we have the background and financial knowledge to help any business take that next big step. Please call us 1-833-226-4288.


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