MADE Magazine #MADEBlueprint - Page 29

MADE INC working capital to free up cash flow. These measures can help increase credit scores, thus improving the chance of securing a small business loan. There are a ton of options available to small- and large-businesses, but picking the appropriate loan will save a lot of time. For example, a new bakery will not be an attractive business for angel investors or other large investments meant for rapid growth. A company such as that will want to pursue a line of credit, a Small Business Administration backed loan or one through a lending institution. Targeting the appropriate funding option will save an entrepreneur time and money. American Express offered some advice for raising the likelihood of small businesses receiving loans below: • Take action to increase cash flow and credit scores. You can sometimes kill two birds with one stone by pay- ing invoices up front in return for pre-payment discounts. This can prevent black marks on your credit record for late payments and can help with the cost of inventory. If possible, try to cut the cost of existing lines of credit and • Leverage the power of technology to help find funding. Platforms such as Biz2Credit can easily connect borrowers with lending insti- tutions that they might never have thought to approach. Frequently, these lenders can offer funding at more attractive interest rates than the big banks. Biz2Credit also offers a BizAnalyzer tool, which calculates cash flow and benchmarks against the industry average and lenders’ loan criteria. This is especially valuable at a time when entrepreneurs are routinely rejected for loans by their own banks. Using the Inter- net saves time, money and resources. 3. Organize Your Business Financials. While this is fairly apparent, properly organizing the business’ financials can be a challenge, especially for a young company. An easy place to start is to create completely separate busi- ness accounts to avoid mix- ing personal and business expenses. An entrepreneur will also need to nurture their own credit score, along with the company’s to boost their chances of obtaining a loan, and to improve its terms. “Demonstrating at least two years cash flow to banks is essential to securing a reasonable investor or a business loan with a moder- made-magazine.com | 29 ate interest rate; also, clearly outlining how you would allocate the loan is immensely important.” For instance, if you own a restaurant and need $12,000 to develop a new payment system, detail that in your plan and the application. Apps like LivePlan and Business Plan Premier can help jump start the process. 4. Be Smart with What You Tell Your Funder. It would behoove you to be transparent about your intentions for the loan during the application process but be sure your intention for your loan is to generate more income so that your investor will feel comfortable receiving a return on their investment. “I don’t recommend telling an investor you’re using to funds to pay unpaid debt or back taxes,” Cole said. “It would be better to let them know that you will use investment to hire employees and already have the contracts lined up so you just need the revenue to generate more revenue.”