Are You Looking for Startup Funding? Avoid These Pitfalls

From bank loans to angel investors to NBFCs, options for secured loans are many
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

  • |
  • Aug 31,2021
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  • 11 Mins Read

Are You Looking for Startup Funding?

A business is created brick by brick. You do sheer hard work, strategizing, and multitasking to mold it into a new-age enterprise. Then, a conducive environment, employ skilled professionals and promote the company. To actualize these elements, startup funding is imminent. 

Financing your business is one of the most intricate tasks. If you are a new entrepreneur, then it becomes even more difficult. Infuriation, dejection, and hussle are things that you will undergo in this process. While securing money for your business, you would be taking an immense risk and ultimately affecting your mental risk as well. Therefore, take adequate measures when choosing the type of financing for your startup.  

A vast array of financial resources are currently available. From bank loans to angel investors to NBFCs, options for secured loans are many. However, you cannot blindly go for any of these options as deep-down research is a prerequisite. In addition to that, here are some pitfalls that you should avoid while financing your startup. 

Understanding Lending Criteria 

Whichever lender or lending company you choose, it is crucial to thoroughly read their lending criteria. Otherwise, you would be making efforts without attaining the actual outcomes. Many banks or financial institutions lay down conditions for business loans. You have to ensure whether your company is meeting those requirements in the beginning or else, you would be stuck amidst the process. 

Explaining the Repayment Process 

If you are targeting investors, venture capitalists and other financial institutions besides the traditional bank loan, then it is vital to explain how they would be repaid. Learning ‘how to finance in the business’ is easier while, on the other hand, repaying that secured capital to the lenders is a long tiring process.

To persuade a cohort of investors or other lenders, ideate a repayment strategy along with ‘why they should invest money into your business'. Every lender seeks an ROI while lending money to a startup. 

Holding Your Patience 

Securing money from a lender will be a strenuous process as you would have to go through different stages to become qualified. The procedure would not be as easy as calling a cab or receiving an instant service from a restaurant. In adverts, many lenders promise quick business loans; however, that’s merely a business promotion strategy. 

Therefore, while approaching lenders, prepare yourself to experience these pitfalls on the path. By keeping your expectations realistic, you can plan your business easily. 

Choosing the Right Fit 

To finance your business, it is extremely important to ascertain as many lenders as possible in your region. Afterward, you can narrow down apt lenders and thus, have a cluster of financial institutions to approach. It is recommended to approach every lender that you have shortlisted. You need not stick to one particular lender that is offering low-interest business loans but also approach other lenders that offer loans at competitive interest rates.

New entrepreneurs should avoid these mistakes while seeking a loan. These suggestions would facilitate getting a hassle-free loan. Besides this, there are other nitty-gritty things that you need to comprehend while applying for a loan. 

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