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6 Common Business Funding Mistakes and How to Avoid Them

More than 20 percent of new businesses fail in their first year. That seems like a large number, but there are many reasons a company might not make it. Outside events are one, and not having a solid business funding strategy is another.

When you’re looking for the best funding source for your business, it helps to understand your financing options. Here are some common business funding mistakes to avoid.

1. Overlooking Your Assets

One of the most common sources of funding is financing your business with debt using an unsecured loan. If you don’t qualify for this type of funding, offer the lender an asset as collateral.

You may be able to use the equity in your home to fund your business. If that’s not possible, consider finding other ways to secure a loan. Use your vehicle or other assets to show you have skin in the game.

2. Not Preparing a Business Plan

Lenders want to see a property prepared business plan with your loan application. If you’re hoping to attract money from friends and family, you have a better chance of succeeding if you can show them your plan. Partners will have more confidence if they can see how they will earn a return on their investment.

3. Don’t Forget Your Annuity

If you own an annuity, you can sell it and use the cash to start your own business. It’s possible to turn your installment payments into a lump sum payout. You may need some assistance with the process.

If you want some help with the legal requirements, check out They can help you receive the cash you need from a total or part payout of your annuity.

4. Missing Grants or Subsidies

You may qualify for a grant from the federal government if you are a small business startup. Other funds may be available at the state or municipal level. The availability of grants or subsidies may depend on the type of business you want to create.

5. Selling Your Assets

Some people make the mistake of cashing in everything they own and putting the money into their new business. If things go wrong, you’ll be left with no business and no savings to fall back on.

If you sell your equities to invest in your business, you will pay tax on any gains or income, and the amount you have to invest will be lower. Instead of selling your investments, see if it’s possible to use them as collateral instead.

6. Failing to Read the Fine Print

When applying for business loans, be sure to read the eligibility requirements before filling out the application. When the lender presents a loan agreement, read the fine print and look for unfavorable terms. There might be prepayment penalties or higher than average interest rates.

Avoid Common Business Funding Mistakes

Understanding how to avoid common business funding mistakes can take a bit of research. When you find a great source of practical information, it helps you learn more about financing your operations.

Did this article help you understand the ins and outs of business financing? If so, be sure to use the search feature to find more information.

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