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Avoid these 4 commercial financing errors

| Feb 22, 2021 | Business & Commercial Law |

Commercial financing gives your business the liquid capital to thrive, grow and expand. If you are unsure where to start when obtaining credit for your business, you can benefit from reviewing the potential pitfalls of this process. 

Avoid these four common mistakes when you begin to apply for financing with commercial lenders for real estate, inventory and other purposes. 

Relying on credit cards

Although business credit cards work well for some purchases, they should not carry all your business debt. Too many new companies rely on high-interest credit cards instead of shopping for lower-interest options with more favorable terms. 

Waiting too long to look for a loan

If you do not have financing in place when a big opportunity arises, you could lose your chance to take advantage. If you do access funds in this situation, your business will pay more than you would if you had time to plan and compare rates. Understand your financing options and take steps to obtain low-interest loans well before you will actually need the money. 

Keeping poor financial records

Without data to back up the profitability of your firm, you will struggle to qualify for most business loans. Prepare extensive and accurate balance sheets and cash flow statements that support the financial growth of your business before you begin the application process. Businesses without an organized accounts payable and receivable system should prioritize that initiative. 

Taking multiple loans

While having more than one outstanding business loan is not always a bad idea, avoid taking out one loan to pay back another. Make sure you have the cash flow to repay financing before you sign the paperwork. 

Business owners who are new to commercial financing can ease the process by steering clear of these frequent mistakes.