5 Ways to Prepare Our Business for Debt Financing

5 Ways to Prepare Our Business for Debt Financing

Not too long ago, the only way we can get additional fund for our business is by going directly to the bank. However, the financing industry has been revolutionized and it is possible for us to get more options when trying to borrow some money. It is important to build our business incrementally and this often requires some amount of money. Eventually, we should make financing decisions. When preparing our company for debt financing, there are things that we can do:

  1. Improve creditworthiness: We should know how to properly borrow money for our business. We should know the proper due diligence that we should perform. The challenge here is to make sure that we can prove multiple lucrative sales that can be used as evidence that our business is progressing smoothly. We are essentially telling others that our company will be able to make money to repay the loan. However, the real evaluation for creditworthiness will involve thorough credit evaluations.
  2. Set up proper internal bookkeeping: Many companies tend to send out their accounting tasks to external agencies. It is important to make sure that there are qualified book keepers on the staff. We should make sure that we are able to deliver instant financial snapshot of our company, so we can show the sophistication of our operation.
  3. Pay taxes: When we are working with an external finance company, we will likely pledge assets as specific collateral. This should be the nature of any debt financing task. The government should step in if we fail to make proper tax payments. It is a bad situation, if the finance company has money outstanding to our company and there’s no collateral to back this up. Our whole relationship with the finance company shouldn’t be placed in default. The finance company should get a duplicate of correspondence with the IRS. When tracking tax problems, this should be considered as a standard procedure. Owing taxes shouldn’t mean that we can’t get financing.
  4. Complete bankruptcy process: Some companies need to enter a bankruptcy proceeding related to business or personal matters. It is important to be upfront about our situation, so it will help us to enhance our financial outlook and we can move beyond the past difficulties.
  5. Prepare enough applications: The external finance company could ask us for various information when they perform the due diligence process. However, we shouldn’t be alarmed, because they don’t try to steal our financial secrets. In general, external financial companies want to feel comfortable with us and our company. They will look for the safest and most reliable way to do business with our company.

In general, we should be able to convince the financing company that we will use money for the right and perfect reasons. We and the finance company should be both comfortable working with one another. We should determine the right plans for our money. There should also be a proper management integrity and we should get a great, working team together.