Over the past few weeks I've had several conversations with clients, potential clients and ex-clients about their business plans, rates and levels of risk. How these together contribute towards the likelihood of success or failure in a finance application.
I thought I'd share some thoughts I've on this. As misunderstanding risk can lead to misunderstanding expectations and this will be reflected in any finance application.
'Before obtaining any form of credit, before any form of business finance is considered; there needs to be a few things that need to be understood. These are Risk and Expectations. If either one of these are misunderstood or dare I say disrespected the consequences can be dire.
With risk, we need to understand how risky your venture is? This can be broken down into financial risk, competitive risk, environmental, political, economic, social, technological, and legal. Careful research into your business and market is essential and needs to be proved to any lender.
Obviously the higher the risk, the higher the rate of interest will be charged on the financial product, and determine the likelihood of success when applying for finance. So, we need to lower the rate of risk to the lender, and thus lower the cost to you the borrower. Of course, this is not the only factor in determining interest rates. But risk IS a major factor in borrowing.
Having clear and reasonable expectations is also essential. When applying for credit, regardless of the product; having unrealistic expectations of your business performance will likely put pressure on your business and hamper your business and increase the risk of failure.'
#businesssupport #commercialfinance #success #research #expectations #risk
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