Six things you need to know about small business funding in Europe

Regardless of size, both small and large scale businesses are important for the growth of the economy. Many small businesses usually shut down after a certain period of time due to lack of funding, because the small business owners think that borrowing money from financial institutions is a complicated and frustrating process. There is no doubt in the fact that obtaining funds from the lenders is a difficult task but here are six things which you need to know about small business funding in Europe to keep your small businesses going.

The main sources of small business funding are banks and credit unions:

Almost every small business owner finds banks and credit unions as the main sources of getting the small business loans. However, it does not mean that getting a small business loan from any bank in Europe is an easy thing to do. According to the survey, the banks are becoming even stricter in their policies related to lending money for funding the small businesses in Europe. To apply for a loan in a bank, you should prepare an excellent yet appealing small business funding proposal. In order to get more information related to the requirements of bank arrange a meeting with the banker.

You have to have a solid business plan:

If you are planning on applying for a small business loan without presenting a solid plan, then you should forget about it. There is no way around and no shortcut through which you’ll escape this phase and get the funding needed for your small business. To get the small business funding, you need to represent a solid plan which includes your personal and business financial details, annual balance sheet and cash flow projection, etc. You can also use the business plan software to develop a perfect plan to impress the lender. Here is a link to guide you more about short-term business loans.

There has to be something in it for your lender:

Whenever you are going to lenders to ask for some funding, you need focus more on explaining the plan which depicts the benefit for lenders more evidently than what benefit it will provide your business. As everyone is looking out for their benefit in everything, so does the lender. They are also looking for the same thing like how much percentage rate of return will be given to them. Likewise, angel investors are looking for an active role in the management of your small business as well as high rate of return in exchange for the money they are investing in your business. Finding an angel investor is a tough job, but it’s worth making an effort.

The size and age of your business matter:

As you know that all the start-up businesses face hard times in finding funds for their small businesses in the same way the size of your small business also matters at the time of applying for loans because it shows how much funds are needed to fulfil the cost of your small business. Another reason why the size of your business matters to the lender before lending your funds for your small business as they ask for the higher interest rate to pay if you have employees less than 20.

You are your business from a financial point of view:

Every lender you approach in Europe to apply for a small business funding will inspect your personal financial history in detail. If they find you as a bad debt risk or unable to present collateral from your personal financial history they will never approve your small business loan. You should be very careful about keeping your personal financial history sound enough that your small business loan application doesn’t get rejected because of your personal financial history. On the hand, some of the local community loan funds may approve to give you small business loans on terms like if you are a young person or have no credit history or collateral due to divorce, etc.

You don’t need the fortune to start a small business:

Just because a person started a small business doesn’t mean that the business won’t expand in the long-run or it doesn’t possess any chances of huge success turning it into a large business. If you are applying for small business loan try to start working from as little funding you get instead of wasting your valuable time which you could use somewhere else.

Author Bio:  

David Simmons is a financial analyst and accounting expert. He has in-depth knowledge about setting up small businesses as well as creating profitable investments. He regularly contributes articles related to business and loans at https://www.ebroker.com.au/.