You’ve worked hard to ensure your business is established and successful – but now you’re ready to take it to the next level.
And it’s no wonder, either. You already know what it takes to contend in a competitive marketplace. You’ve created a game plan that’s made your business profitable, expanding by the day. But how do you take the next big step?
Perhaps you’re looking for $500,000, $1 million, or $2 million worth in loans. While there are more types of bank financing than ever before, business owners still find it challenging to get the financing they need. And since every business is unique, it’s crucial that you reduce your risks and the cost of debt by matching your loan to your business.
To help you out, we’ve compiled a list of four tips for securing million dollar loans.
1. Know your business
For starters, you need to make sure that you have impeccable financial projections that show how the loan money will be used and the effect it will have on both cash flow and growth. Make sure that you provide a solid business plan – banks want to see that you have a proven track record of success. Remember that your business plan must make a clear case for receiving financing, showing that you understand the risks and you know how to mitigate those risks.
2. Understand the different types of funding
The next step is knowing what to look for. Sometimes it feels like banks are speaking in a foreign language, so here’s a quick intro to the basics.
Equity Funding – Equity comes from the business making money over time, or from external investors. Generally it stays in the company until it is sold, or the the equity holder is bought out. It’s important to note that private equity investors will want to see an exit strategy.
Debt Funding – Debt comes from banks and other lenders, requiring the company to make interest payments over time, and repay the principal at a set date, or over a prearranged period.
Grant Funding – Grants are non-repayable funds that come from the government.
Long-term Loan – Long-term loans are generally repaid over a period of five years or longer depending on what the loan is for. These types of loans are deal for buying equipment, land, buildings, vessels, and vehicles. In other words, anything that’s very expensive and will be used in the business over a long period of time. Remember to try and match the loan term with the useful life of the asset.
Short-term Loan – Instead of monthly payments, you’ll generally repay short-term loans at the end of a predetermined period. They’re usually smaller, and are great for seasonal businesses or temporary situations, such as “bridge” financing – a short-term loan that’s put in place while long-term financing is being secured. Just keep in mind that short-term loans can be very expensive.
Line of Credit – A line of credit is like your credit card; it lets your business access incremental funds when necessary. Many businesses have low interest lines of credit – but the problem with a line of credit is that it’s designed to provide financing from time to time, not to buy longer term assets. Lines of credit have features that can increase business risk during an economic downturn.
Demand Loans – A loan the bank can cancel at any time, even if you’re making payments and meeting your obligations. This happens more frequently in an economic downturn, when you most need the money. Many loans are demand loans so make sure that you read the fine print!
Non-Demand Loans – A loan that stays in place regardless of other external economic factors, unless your business is in default (misses payments, etc).
3. Speak to the right people
Once you know what you’re looking for, it’s important to speak to a variety of investors to ensure you’re getting the right funding at the best rate. Different lenders and banks offer different types of loans with different repayment terms, interest rates, and covenants. Bankers often specialize in specific industries so find out which one is most competitive for your type of business.
4. Get noticed
Winning awards doesn’t make a difference to banks, but they do make you visible to them. Overall, banks want to lend money to good businesses. But with 184,000 small businesses in BC, how does a banker find you?
There’s a new list in town called ‘The 50 Most Fundable BC Businesses in 2018,’ but you need to demonstrate your outstanding success to make the cut. Fortunately, it’s easy to apply – but only 50 businesses will qualify.
This list makes for an incredible opportunity to raise your profile and get a chance to pitch real bankers for real money. If you qualify for the list, you’re automatically qualified to pitch at the Real Business PitchFest 2017. You’ll get to learn way more about getting million dollar loans and have the opportunity to ask questions to financial experts with different areas of expertise about getting the best deals.
It’s easy to apply for the list – just fill in the form on the website. If you make the shortlist, you’ll get a call from someone on the list selection committee to see whether your business gets to the next round.
If you do decide to attend the conference, you could pitch and get the funding you need to take your business to the next level. Good luck!
Real Business PitchFest 2017
When: November 12 to 14
Where: Pinnacle Hotel Harbourfront – 1133 W Hastings Street, Vancouver
For more information and to register, click here.
Daily Hive is a proud media sponsor of Real Business PitchFest 2017