Dec 12, 2012

7 Crucial Aspects to Remember While Positioning Your Firm for Debt Financing

Few years ago, the only way to raise capital for your business was by visiting a bank and requesting for a loan. Today, on the other hand, times have changed with the massive explosion of equity investments. The changes are not limited to just that, as most of the guidelines followed for running an organization have also see a revolutionary change; having said that, these big changes are only meant for big organizations that have the power to accelerate their return earnings and investors hardly hesitate to invest in such organizations.

For the rest of the small businesses, medium sized businesses and even start ups, going the old school way is still the only choice. Even though it is often an expensive affair, many companies can’t help but seek loan from financial organizations.

By understanding what big financial organizations look for, you can prepare your business to be a much credible and attractive prospect.

1. Creditworthiness: Having a list of credit worthy customers can be a big asset. Remember, this is a very challenging task as you would be lending your money to a company, which could potentially never get a proper loan from a good financial organization. So you need to be doubly sure about what you are doing.

2. Taxes: You don’t want the government to be on the driver’s seat through a process like this. So pay the taxes on time to keep off any kind of government intervention. If the latter happens you would hardly be left with any collateral to back up your outstanding money to the business.

3. Applications: Every financial institution performs its due diligence in its own way following its own guidelines. Don’t be threatened; in fact make them feel as comfortable as you can. All the company wants to do is become comfortable with you before going ahead. So give all the information through the applications and be as transparent as you can.

4. Usage of Money: While it sounds very obvious to use the money for right purposes, it becomes quite relevant at times. Sometimes the financial companies are also inclined towards a particular kind of business because of the history they have with people working in that business. This is when raising capital for a start-up becomes a problem.

5. Be Courteous and Professional: This is extremely important. Answer their calls, give information as and when they want and show up when they request you to. This can be a game changer. You would be surprised to see how friendly these financial companies can get just with the help of good gesture.

6. Avoid Concentration: Don’t keep all your eggs in the same basket. You making a big sale to a customer and then sitting happy not trying to push further to other customers will land you in trouble. There are always chances of your original customer not willing to avail your service or product anymore for any reason. This could give you a big blow.

7. In-House Book Keeping: Many organizations choose to outsource book keeping work but having a competent in-house book keeper is a great asset as you would always be ready with your financial snapshots, which would further show your sophistication and competency.

The aforementioned points are broad guidelines and should be followed diligently to be able to appear competent as and when needed. Preparing your firm for debt financing may not be the easiest job but a lot of pressure goes off with an organized and planned approach.

Criss Derek is an investment banker who advises the business owners to streamline their billing and invoicing process, in order to improve cash-flow, and maximize profits.

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