Every new business needs financial help in the beginning. It’s no different with regards to your architect business. The right financing can help you rent or purchase new equipment, hire staff, increase your working capital, and even restock supplies without having to dip into your personal finance.
But securing financing can be a bit tricky. Lenders are not satisfied with verbal surety and demand lots of proof that your business is worthy of their money. They need assurance that you will be able to repay your loan.
If you are trying to secure financing for your architect business, here are a few tips to gain the trust of lenders.
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Know Your Loan Options
When you understand the kind of loans available, you will understand who you can approach to finance your business. Keep in mind that the type of loan you apply for will depend on:
- How long you have been in business
- Your annual profits
- What you want to do with the money you borrow
Based on what you need the money for, you can apply to multiple types of loans:
- A business line of credit
- Term loan
- Short term loan
- Equipment loan
- Invoice financing
- Merchant cash advance
- Commercial mortgage loan
- Franchise loan
- Start-up business loan
- Small Business Administration-backed loan
Understand Where You Can Procure a Loan From
Knowing the type of institutions that provide business loans will help you save time from looking in the wrong places. You can secure financing for your architect business from:
- Banks
- Credit unions
- Alternative lenders (direct lenders and peer-to-peer lenders).
Get Professional Liability Insurance for Architects
If you have an architect’s professional liability insurance, lenders are assured that you and your assets are safe against legal cases.
Professional liability insurance can protect you and your architect firm (including your employees) against claims that allege negligence, errors, or omissions during the performance of your architectural service. Check this website for all the benefits of owning architect professional liability insurance.
Keep Track of Your Personal Credit Score
If your architect business is a newly-setup operation, lenders will be eager to see your personal credit. Before you ask for a loan, check, and clean up your personal credit.
If you have a good personal credit score, you can also opt for a personal loan for business use. This works well for new businesses. If you decide to take out a personal loan, you will be solely responsible for the repayment of the loan. But personal loans are easier and quicker to get than a business loan.
Increase Your Business Credit
If you decide to go with a business loan instead of a personal loan (see the previous paragraph), building good business credit will prove that you are a reliable and responsible business person who can repay their debt.
Good business credit can positively impact your loan application and get you the financing you require for your architect business.
Get in Touch with Your Accountant
If you don’t have your own accountant, get in touch with one before you apply for a loan. An accountant can help you decide how much funding to ask for.
Your business requirements are unique, so you need to assess your business to figure out a realistic amount. You will need to go through income statements, balance sheets, and cash flow statements as well.
You will also need to picture different scenarios – what happens if it takes longer to get started, and what happens if a client’s payments are delayed by over three months. An accountant can help you with developing the financial statements as well as scenario plans.
While these tips will help you to secure a financial loan, there is one important point to remember after you secure your loan. Build and maintain a relationship with your lenders. Often, lenders have access to more than just money – they have a wide range of knowledge on financial matters.
So, while you prepare to apply for financing for your architect business, ensure you also ask your lenders for financial advice to ensure you can pay back your loans on time.
Sources:
- ADPro. 2019. Best Small Business Loans Here’s What you Need to Know. [ONLINE] Available at https://www.architecturaldigest.com/story/best-small-business-loans-heres-what-you-need-to-know. [Accessed 13 January 2020].
- Architectural Record. 2020. Professional Liability Insurance for Architects When to Get Serious. [ONLINE] Available at: https://www.architecturalrecord.com/articles/6964-professional-liability-insurance-for-architects-when-to-get-serious. [Accessed 13 January 2020].
- ArchiSnapper. 2013. Finance Account Tips. [ONLINE] Available at https://blog.archisnapper.com/finance-accounting-tips/. [Accessed 13 January 2020].
- Redshift by Autodesk. 2013. 5 Tips to Perfect your Small Business Loan Application. [ONLINE] Available at https://www.autodesk.com/redshift/5-tips-to-perfect-your-small-business-loan-application/. [Accessed 13 January 2020].
- Bizinsure. 2020. Insurance for Architect. [ONLINE] Available at https://www.bizinsure.com/insurance-for-architect/. [Accessed 13 January 2020].
