If you want to start developing a small business, you will need seed money for this. Most companies start by taking a loan from a bank, because life in a big city is not cheap, and for the development of the organization it will take a lot of investments in the first stage.
If you opened your business and he started working, and then you find out that you are denied a loan, this can greatly hinder your business plans. This can lead to confusion, but this does not mean that you need to give up your dream of becoming an entrepreneur. Do not worry, you are not the only one who has come face to face with a similar problem.
There are several reasons why you were denied a loan. The most common of them is a bad credit history. Other common causes are weak cash flows in a company, lack of collateral, or high levels of debt to income. Over time, you can build a business and improve your credit scoring, but what to do now?
Take a moment – If you are denied a loan
This is a signal that the business model is unstable and there are some gaps in its composition. It’s a good time to review your business plan more carefully. Go through all the points again and make sure that all your achievements make sense. Find weaknesses and make changes. Talk to your personal manager to find out exactly which points affected the refusal. Discuss your business plan and find out how you can make it safer and, therefore, more attractive to lenders. You may find, for example, that the main obstacle at the moment is the lack of collateral. This is a completely normal situation and in order to get out of it, there are several ways.
Traditional banking organizations are not the only places where you can get what you need.
MFIs such as House Money are registered companies that are controlled by the Bank of Russia and that specialize in issuing microloans to those who have difficulty in taking a loan from a bank. In such companies you can get attractive lending options, if you were denied a bank. Because they pay less attention to the credit history score and are more interested in the borrower’s personal goals and his business plan.
Taking a microloan, you can still claim some bonuses of this system. For example, an MFI can promptly send all data in the BCH about your loans and payments on them, which will have a positive effect on your credit history. There are companies that can help start and run a business, giving advice of a professional and financial nature.
Relatively new financing option. Through the platform on the Internet, the relationship between those who have the opportunity to help with money and those who need money is getting better. Payment for services on such services is usually charged to investors. Instead of contacting the bank, individuals and legal entities can borrow money from those whom they trust. Due to the low costs of the platform, it can offer lower interest rates.
In case you have been denied a loan everywhere, you can try to re-apply for a traditional loan. At the same time, apply some enhancements to improve your candidacy.
A business partner can buy a part of the business, thereby financing further development. In exchange for funding, the partner will receive a portion of the profits from your business. In addition, partnership means that the investor can interfere in the process of work and relatively control the business. Make sure that you have a clear agreement and that all the points that may affect your future work are spelled out in the contract. Be attentive to the potential partner – you will cooperate with him for a long time.
Find a guarantor
If you have a relative or friend with a good credit history – such a person can greatly help you get the necessary amount of credit.
Borrow from friends
If among your friends or close people there is someone who wants to invest their finances in a business, this is a good option to consider. Your family or friends may be willing to help you, where traditional lending has failed because they know you better and longer than can be indicated in a credit report. However, simply because these people are always there, does not mean that you can be careless about the financing on their part. Prepare for the conversation so if you applied to the bank. Fix everything on paper or computer and show your firm intentions to grow the business and pay off the debt on time.
If you are denied a loan, and the business is already in operation, examine your suppliers. If you are on good terms with someone , they can be a source of funding. Remember that these people trust you, so calculate exactly how much you need to borrow money. You can also discuss with suppliers the deferment of payment for their services. It can help your financial condition.
Do not despair immediately, if you are denied a loan, look through all sorts of options. Evaluate your candidacy and identify weaknesses to increase your chances.