Maintaining consistent small business cash flow can be challenging. To keep growth steady and insulate your business from unexpected external factors, you need to secure a reliable source of funding.
Many small businesses rely on funding from lenders to keep their cash flow steady. Those lenders look at many different metrics about the company’s performance and finances to determine whether their investment in the company is worthwhile. Understanding these different metrics can help you ensure that your small business cashflow and funding requests are successful.
Lenders analyze your personal credit score to get a better idea of your financial history. The higher your credit score, the more likely it is that your loan request will be approved. A history of foreclosures, debts, collections settlements and late payments might deter a lender from approving funding.
Lenders look at the size of the market you operate in to determine whether the size of the loan you’re requesting is consistent with market conditions. Businesses operating in bigger markets typically have an easier time securing larger loans. However, even businesses in small markets can receive the funding they need if their applications meet the other criteria and they have a well-crafted business plan.
At a time when online marketing and sales are bigger than ever, your online presence is increasingly important for funding. Lenders consider online presence when deciding whether or not to provide funding. A strong follower base indicates greater potential for online sales, and that can work in your favor in the eyes of a lender.
Lenders use information about your business’ revenue to assess your capacity to pay back loans. Steady revenue shows a lender that you will be able to make regular payments over time. Businesses with a large revenue stream can secure larger loans, while businesses with less revenue or new startups have a harder time.
You can expect lenders to look at your lending history as they review your application for funding. A history of frequent borrowing and loan applications can indicate instability, which is a major red flag for a lender. However, even if you have a history of frequent borrowing, you many still receive loan approval if you have paid all of your loans off on time and in full.
Lenders analyze cash flow by looking at bank records to determine how much money is being deposited and how frequently deposits are being made. Frequent, consistent bank deposits show a lender that your business has a steady stream of revenue with the capacity to pay back the full amount of a loan within the designated term.
In addition to your personal credit score, a lender will analyze your business credit score to determine eligibility. You can build your business credit score by taking out loans in the name of your business instead of your personal name. This allows you to develop your score and build credibility for future lending approval.
When you are looking for funding for your small business, start by finding the right solution for your needs. At Tenet Financial, we provide small business funding solutions to entrepreneurs and business owners across industries. Learn more about our services by contacting us today.