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Business financing is just like a medical stethoscope; if you don't have the right expertise to use it, it would only feel like an ordinary, pretty tool in your hand. Although merely looking at it, it may appear attractive to you (just the same way the promise of getting instant money to kickstart your dream might seem attractive), you’re never achieving anything (getting any money) with it until you learn how it’s used.

My point being? It doesn’t matter how much money you think you can get from the business financing opportunities available around you, if you don’t have a good understanding of the rudiments involved, you’d just be there for years applying and getting turned down.

But when you know the rudiments of it, it becomes near-impossible for you to make mistakes when applying for it.

It is in this light that I’m now going to share with you some common mistakes you need to avoid when it comes to getting that business financing that has long eluded you.

No business plan

How on earth will someone show up at a lender’s office without carrying a credible business plan? You may wonder. Well, strange as it may sound, some business owners do. And as you might have guessed, they get turned down even before submitting their requests. Ouch!!!

Take it or leave it, without a credible and convincing business plan, no one will lend you anything to launch or grow your business. Think of a business plan as those overalls worn by medical practitioners. Even if you’re carrying the said stethoscope and you approach a patient without wearing such overall, it might be pretty difficult for you to convince a patient that you’re the practitioner they’ve been waiting for. So, in order to convince a potential lender that you’re serious-minded, you must approach them with something that suggests so – a business plan.

In addition, not only will a business plan give the right impressions about your ambitions, but it will also give the potential lender insight into the business you're asking them to invest in.

Not researching options

Isn’t it funny how some entrepreneurs claim that they’ve not been able to secure funding when, in fact, they’ve not really explored the options available around them? One of the biggest mistakes anyone can make when it comes to business financing is sticking with the first or only option they can find.

Perhaps they thought all lenders are the same. Well, the truth is that lenders or investors have differing standards and rules. Therefore, you need to investigate the options available to you first before making a decision. For instance, while some lenders clearly state from the beginning of their dealings with you that they don’t give room for negotiation in the event of default, other lenders might be more willing to show you more leniency in the event that you get cash strapped, by permitting you to resolve the rest of your debt with schemes like the Trust deed. Furthermore, while some equity investors prefer certain industries, others may be open to offering funds to just about any industry.

So you see, before you decide to strike a deal with anyone, it is important that you first research all the options available to you. Then and only then can you come to a final conclusion on the lender or investor you want to go with.

Underestimating the amount you need

I know you might find this hard to believe, but the fact remains that some entrepreneurs actually approach lenders without fully understanding the exact amount they need. But who can blame them? After all, they’re business owners, not financial experts.

Unfortunately, if investors or lenders think that you have miscalculated the amount you need to grow, they will not fund you. Bear in mind that there can be fees connected to loans and equity investments. Add them to the amount you request.

Also, remember that the market value of tools, items, and investments might change at any given time, so be sure to go with an up-to-date funding estimation.

Too much personal debt

Strange as it may sound, the personal debt life of a business owner actually has a significant effect on their chances of securing business financing. If you’ve taken too many personal loans, home equity loans, credit card loans, or mortgages in the past, the reality of it might come to hunt you when seeking business financing.

I know we sometimes have some crucial reasons to take these loans, such as when we want to follow through with prepaid funeral plans, solve an urgent need, attend to an emergency, and resolve some financial obligations. But if you know that you'll be applying for a business fund anytime soon, it is better to steer clear of these loans until you secure your business funds.

The reason for this is that failure to meet up with the payment of any of these debts might ruin your credit score or place you on the wrong side of the record books of the credit bureaus. Now, when you approach a business lender with a less than impressive credit history, the chances are that you would get turned down.

Taking the wrong kind of financing

Who said your business financing has to come through loans? While loans are, obviously, the most common source of business financing, they are not the only ones there. With other options such as crowdfunding, equity investments, grants, and self-funding, you can save yourself from the possibility of dealing with lenders and their bailiffs.

By and large, always evaluate the funding options available to you before you proceed with your decisions.