February 4, 2019 | Mason Roberts
Applying for small business funding may be a more complex process than a new entrepreneur may initially think. It's more than just picking the right lender, it is also about picking the right time to apply for one, to ensure you get the best funding options possible. The difference between small funding given from, say, November, as opposed to one given in January, can be outrageous. It can affect the changes that you, as a small business owner, want to take for your business to grow.
Many lenders actually advise that the best time to apply for business funding is when you think you don’t really need it. Why is this? Because things change at the snap of your fingers. If your revenue is high and you have the means to pay it back, why not be prepared for the unexpected? There are hundreds of small businesses a year that go under that were doing very well, once upon a time. If your business is doing well and bringing in a large sum of money, chances are you will also be given more funding at a lower rate because your lender is sure you can be trusted when it comes to payment due dates. In this kind of situation, when everything is going well in your small business, try to consider the best way to make sure it stays that way. A small business fund for the right amount, at the right rate, at the right time could make the difference between a sophomore slump and getting voted most likely to succeed! So, what do you need to take your successful small business to the next level? Here are the top aspects to consider when taking out a small business fund.
Worst Month, Low Acceptance Rate
Many business owners choose to ignore the fact that they may need some financial help later down the road, and end up applying too late in the year. This could mean their business and personal finances suffer from the crippling interest rates that result. NerdWallet, the largest online person-to-person lender, researched small business funding in-depth, and after examining the subject for some years, they determined that December is the worst month to ask for funding. This is because of some uncompromisable factors. The last month of the year is also the worst time of year to apply for a small business fund because it has a very low acceptance rate. Not only do you face a low acceptance rate, but if you do happen to be approved for small business funding, it's almost not even worth it because the interest rates are incredibly high. It's the month with the highest interest rates of all the others throughout the year. If you are an aspiring entrepreneur who believes they may need added funding come December, the best thing to do is be realistic about your business needs and apply for additional funding a couple of months earlier.
Best Month, Lowest Interest Rate
Just like there's a worst month for available funding options, NerdWallet's research also revealed the best month for your small business fund. Upon analysis, it was determined that the best month to apply for business funding is in November. In November, there is a high acceptance rate all month long. November approvals also have a low-risk premium and a low-interest rate. Lenders are most likely to give you the most money while saving you the most. That makes November a good time for all business owners to get needed funding. As a small business owner, it's important for you to be thinking about factors like this, and weighing your options to determine the most vital for your long-term success. If you're prepared (especially financially) for every possible outcome that may come your way, your business is in good and capable hands.
Why Are There So Many Small Business Funding Requests in December?
When it comes to taking out a small business fund strictly for your business alone, it is unclear why entrepreneurs are in such a money crunch, come December. There can be many different reasons, personal, business, or otherwise. One theory is that this is based on business owners' rush to keep their inventory well-stocked for the holidays. If a business takes inventory in October, the payments for suppliers can very well be in December. If the business owner is already struggling with meeting their revenue and inventory needs, finding a way to pay these costs may find them in a position where they turn to a small business fund to help solve their problems. If this happens all over, every year, that will turn into a lot of requests, which in turn results in a lower number of acceptance rates. Now, this is not the only reason that December is bursting with small business funding applicants, so it's hard to determine why every applicant is in need of one. With all of this considered, however, it's hard for lenders to say yes to every business owner in need of that extra funding. When it comes to applying for a small business fund, the rates come hand-in-hand with many other factors, one of the biggest being the demand there is at time of the year you're applying for one.
Things Are Looking Up in the New Year!
While December is the worst time of the year to apply for a small business fund, the new year tends to look up when it comes to applying for additional funding. Lenders tend to be more lenient by the time the new year rolls around; this is said to happen for one main reason. December is a financially-tight time of year for hundreds of thousands of people all over the world. With the holidays upon us and the new year just around the corner, many people find themselves looking for help, whether they're soccer moms or small business owners. Added funding is so frequently requested that the lender simply can't just accommodate everyone. Lenders also tend to be wary of those applying in December, because the chances of untrustworthy people requesting them tend to be higher as the rate of funding requests grows immensely. The overall rates from December to January, whether they be acceptance rates, interest rates, or low-risk premiums, all improve by the time the new year arrives. If you are considering applying in December, your best bet as a business owner may be to try and move some money around and consider holding off on applying until you hit the new year. That's one smart way to start the new year off right!
Though your business is small, the process of owning, operating, and having capital for your business is still complex. If you think your business is doing well and you will never need a small business fund, look into your finances again. And again. Be sure that this is something that you're really certain about. If you've found yourself in an unexpected crunch towards December of last year or the year before, you may already know that it could be harder to get the small business fund you're in desperate need of at a rate you can comfortably afford. Take into account all of the possible outcomes your business can endure, and make a truly informed decision from there. You'll be glad you did!