Starting a small business can be a daunting but equally rewarding endeavor. Shedding the typical nine to five can allow you to pursue your passions, tailor your job to your skillset, assume full creative control, be your own boss, and turn a profit.
If you think you’re ready to take the next step and turn your business idea into a reality, there are a few steps to follow to get started. Begin by clarifying your reasoning for starting a business and develop a business plan. That way, you can ensure your business proposal rests upon a sturdy foundation from the get-go. Next, assess what your funding options are. You can find capital for your business through various avenues, most commonly business loans. However, business grants, crowdfunding, and investors are also viable options. Finally, you’ll need to decide how to legally structure your business, which can drastically affect taxes and liability. Before you’re ready and set to maximize profits, you’ll need to register with both the IRS and government to obtain a business license.
Unfortunately, there are a few common pitfalls that many small business owners fall victim to when first starting out. Many entrepreneurs perceive the small business loan application process to be a maze of twists and turns that ultimately lead to a business’s downfall if completed incorrectly. Complications with financing, poorly designed business plans, and poor management can all land you in hot water. Luckily, you can minimize your risk of failure and entrepreneurial mishaps by navigating the small business loan application process with caution and avoiding the following mistakes.
Jumping the gun and choosing a notary at random
Choosing the right notary public can make or break your experience with a small business loan application process, so choose carefully. Check their credentials and professional memberships, as many professional associations hold their members to a higher standard by requiring continued education and a specified amount of working hours.
Some notaries may be specially trained or have extensive experience in a particular area. That said, you’ll need to find a notary near you that specializes in small businesses and loans. Note that all aspiring entrepreneurs must have a power of attorney form notarized for a lender to fund your small business loan. Fortunately, the right notary should be able to help guide you through the process and clear any hurdles blocking your path.
Borrowing more than you need
As is the case with most loans, strictly borrow what’s necessary. Before starting the small business loan process, nail down exactly how much funding you’ll need to succeed. That way, you can avoid getting caught in the trap of thinking that you should borrow more for an added financial cushion. Unbeknownst to most, borrowing more than you need will result in paying more interest, which can make it much harder for you to pay off the loan in the first place.
Using your loan for the wrong things
A small business loan is a powerful tool that you can and should utilize to propel your business forward. Applying for a loan only when there’s some kind of financial emergency is, undoubtedly, stunting your business’s potential. Using your loan to pay for marketing, materials, staff, and more can help your business reach new heights and optimal productivity. With this reality in mind, you’ll need to develop a plan for what you intend to use the loan for and how it will benefit your business.
Having a poorly-designed business plan
A business plan lacking close attention to detail can lead to all kinds of problems, including, but not limited to, a business loan application rejection. Lenders want to know that you’ve thought about what your business needs to succeed and that there are contingency plans in place for those occasions when things go awry. A well-designed business plan demonstrates that you feel prepared for every curve ball thrown your way. Similarly, a detailed plan implies that you know how to progress your business and respond to plateauing sales.
Starting a business before lining your financial ducks in a row is a recipe for disaster. That said, take the proactive approach and cover all of your bases before embarking on your small business journey.