All companies need working capital to start their operations. Working capital is also essential if your business needs a cash injection to get you from one order to the next. There are definitely so many uses you can find for working capital that business owners definitely work hard to get your application approved for this type of loan.
If this is your first time applying for working capital, there are some helpful tips and considerations to keep in mind so you can get approved and avoid rejection. Below are some of these:
Assess your capital needs first.
Before you begin your search for capital investments, it is important that you first accurately assess the amount you need. This is because if you ask for too little or too much, you can end up hurting the relationship you have with potential investors or lenders. You could also end up giving up too much for funds you don’t really need.
To accurately assess your capital requirements, consider the following:
• Use benchmarking data to influence your cost forecasts and return on investment (ROI).
• Always include inflation and commodity prices when forecasting your cash flow because your costs are likely to increase slowly over the years in many areas.
• To improve your overhead and margins, be sure to eliminate unnecessary expenses.
• You can consult an accountant to review and double check your findings.
Be sure to present a good business case.
Once you have an accurate assessment of your business’s capital requirements, you need to consider how you will present your business case to potential investors or lenders. Start by drawing up an interesting and attractive business plan. Potential investors and lenders will want to see your business case presented in black and white in this accepted format.
Your business plan should contain all the vital and honest information for potential investors and lenders. These details should include:
• The amount of capital you need.
• Evidence and predictions to support your assessment.
• Your detailed plans for how the capital will be spent.
• The ROI you estimate for investors, including amounts and time frame.
• A summary of the company’s ability to pay the debts of the lenders.
• Proof that you have taken precautions to minimize your capital requirements.
Consider the boot.
Lastly, if you’re still in the pre-launch phase, learn about bootstrap and find out if this might be the best option for your business. Bootstrapping refers to the practice of structuring a start-up so that it can be launched with low capital costs and financed solely from earnings when established. This allows the start-up business to avoid the need to raise capital either by taking on debt or by raising equity.
Read more about how to apply for working capital here.
