Most small and medium business owners get the timing of their funding journey wrong by being reactive instead of proactive when it comes to building funding partnerships. “Rather than approaching funding partners when the business faces cash flow shortages, SMEs should approach partners when their cash flow is strong, and they are in a growth phase,” advises Tyler Posthumus from Retail Capital Group. He cautions that if SMEs wait until they are desperate, it weakens their application.
To help secure funding, Posthumus says business owners need to have a plan on how to obtain funding, from whom, and know which products best suit their business and funding needs.
SMEs may also have the perception that obtaining business debt should be avoided. This misunderstanding needs to be framed differently. “Financing’s purpose is to be a catalyst for growth. Business owners need to wrap their minds around this; the point of securing financing is to take hold of scaling opportunities earlier to help accelerate business growth. Businesses that apply this concept can effectively turn their businesses around, from survive to thrive,” he says.
Understand the purpose of credit
Before applying for finance, business owners should get their accounting and tax affairs in order to fully understand the financial performance and position of their business. Developing a clear understanding of their business and its environment is also key, as is creating a game plan for the next 6, 12, 18 and 24 months. In other words, SMEs need to plan out the runway for the business.
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