If you’re trying to start a small business, have a great business plan and finding that getting business finance for your idea or company is a lot harder than you thought it would be, you’re probably frustrated. However, there are a few good reasons why business finance is so hard to find, and in this article, we look at what they are.
Unfortunately, as you probably know, the world has just emerged from a major recession. Not only that, however, but there’s been a global credit crisis, with many banks, financial institutions and even countries declaring bankruptcy. That has meant that traditional lenders around the world have had to tighten up their lending policies, and that’s one of the main reasons that business finance through traditional lenders has become so hard to access.
Of course, there’s also always been a lot of competition among potential entrepreneurs and small business owners, and the fact that there’s now less finance available means that it’s even more competitive.
Add to that the fact that many people who were laid off during the recession are also trying to start small businesses, and you begin to understand why you’re competing against so many other entrepreneurs!
Changes in Business Lending
Even though there are more and more people seeking business finance these days, fewer of them are seeking traditional financing for their business. More are turning to venture capital and other types of business finance, but they have very different criteria.
In fact, because venture capitalists want to make a lot of money, quickly, they rarely look at companies looking for anything less than several million dollars. This means that if you’re just looking to start a small family business, you won’t be able to access that type of finance.
Stricter Requirements and More Sophisticated Lenders
There probably was a time when getting business finance was a simple matter, of having a good idea, and visiting your bank manager.
These days, however, lenders are far more sophisticated, and you’ll have to have, at the very least, a professional business plan. You’ll probably also need to have a registered company, existing marketing materials, a team of whiz kids, and a whole lot more if you want to impress today’s lender.
It’s exactly because of that that so many potential small business owners decide they don’t have what it takes to apply for business finance, and shelve their business ideas.
Scams, Schemes and Shady Characters
The final hurdle you will have to face, as a potential entrepreneur seeking business finance, is learning to distinguish between genuine financiers, and the people out there who are looking to take you for a ride.
As the world moves closer towards being a true global village, fraudsters from around the world are able to target more people than ever. Because those unscrupulous people know that people seeking business finance are usually desperate to get it, there are plenty of individuals and organisations that are targeting them. You will need to learn to identify those people and organisations, and avoid them. A good rule of thumb is to avoid any business finance offers that require you to pay an ‘administration fee’ upfront. They’re usually just people who will take your money, and disappear.
Reading this article, you could be forgiven for thinking that finding business finance for your company is impossible. It’s not, however, and entrepreneurs that have what it takes to succeed in business (a great idea, creativity, and determination) will almost certainly find some way to start their business – whether it’s business finance through traditional means, or bootstrapping their company into being. Stick to it, and you will find a way!