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Five financial assessments to make before seeking financing to grow your business

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Wherever you are in your business journey, financing remains a constant need. Your business may now be in a place where you are ready to grow and need new or additional financing options.

Before you even begin your search, it is critical that you identify why you are seeking funding in the first place and determine how the money will be spent. Whether it’s equipment, paying off company debt, hiring new employees, or preparing for an emergency, you’re much more likely to be successful in obtaining financing with a clear reason in mind and a spending plan.

Now that you’ve found a reason to seek financing, it’s time to take a moment to examine your current financial situation. Here are five things you check.

1. Personal and Business Credit: Before applying for more financing, assess both your personal and business credit with the three major credit rating agencies. Usually you can get this information once a year for free through Equifax, Experian or TransUnion.

2. Liquid assets: Take stock of your available assets that you can use to invest in your business. It is wise to make an appointment with your accountant or financial planner to get the most accurate picture of your financial situation.

3. Collateral: Evaluate any collateral you have, such as your car, property, checking and savings accounts. Often, lenders require collateral to ensure that you are a serious borrower and can repay the loan. Consult again with your accountant or financial advisor for the most accurate advice for your financial situation.

4. Personal and Business Debts: Assess any personal or business debt you may have. This includes student loans, mortgages, car loans, etc.

5. Business Valuation: Depending on the situation, you may want to consider a business valuation. Some investors may want to see one before even considering giving your company any money. A business valuation in the simplest terms is a process of determining the economic value of your business. Regardless of the size of your business, this process usually involves a complete and objective assessment of every part of your business. This includes equipment, inventory, property, cash and anything else of economic value that your company owns. Your management structure, number of employees, income and expected earnings may also play a role. Before starting a business valuation, be sure to consult with your finance team.

Once you have made these assessments, the next step is to seek financing. However, doing this work at the front will give you a better foundation than you.

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