Opening a new business can be one of the most exhilarating experiences of a person’s life, and one of the most frustrating. Ask anyone who has attempted to open a business and has to secure capital to do so. It’s not easy. That’s because the credit markets look at startups as a risky investment, and either charge higher rates to compensate, or don’t offer financing at all to those buyers. According to Neil Patel, a contributor to Forbes Magazine, 90% of startup businesses fail. Reasons why startups fail can vary, but in general the marketplace tests every business plan without prejudice, and banks understand this better than most. And this is why it can be so difficult to secure the capital needed for investment. You are limited by the number of banks that will lend money, and criteria and guidelines one must meet in order to secure that money is more stringent. The good news is that this process will only make you stronger.
Startups by definition have little to no established business history. A credit decision is therefore supported in large part by the financial strength and credit history of the owners. However, other factors can contribute to a decision, such as a thoughtful business plan. Not every business owner takes the time to write out a business plan, which is why we provide a Startup Questionnaire that clients can fill out in order to increase the strength of their credit application. Do you have to fill out this questionnaire in order to get approved for financing? No. Will it help if you do? Yes, especially when no business plan is available. Showing a bank that you have completely thought through your business venture is critical to securing financing for startup businesses.
Every credit approval is like a table that needs to stand up on its own. When established business credit is not available, we need to build a table that has at least three legs to support it. Having a well thought out plan can be one of those legs. But financial strength is going to be another important leg to this table. Providing a Personal Financial Statement for each of the owners involved is a good way to build that leg. Banks want you to succeed just as much as you do, but they also want to know that any liabilities can be covered should success not be realized in a timely manner. Having additional streams of income or assets increases the confidence of banks to lend money. Do you have to disclose all your assets and liabilities in order to get approved? Not necessarily. Does it help if you do? Significantly.
Kingswood has built a reputation of getting more startups the financing they need when others cannot. We have earned this reputation by learning what it will take to secure startup capital, and with this experience provide clarity to help our clients navigate what can be a challenging process. Because of this experience, Kingswood has been able to get more money for our clients than our competition, all at the best rates available.
Are you, or someone you know, looking for financing for a startup business or new location? Experience the Kingswood advantage – Apply now to get started.