Starting a business is a big step, but maintaining and successfully growing it remains the most challenging part, which often leads companies with even very good business ideas to abandon their plans in the first year due to a lack of funds. Here, financing becomes a lifeline, which, unfortunately, young or small companies often struggle to obtain. The crowdfunding platform for businesses "FinoMark" shares advice on the challenges companies face and how to address them when seeking financing.

Lack of Confidence-Building Evidence

Young companies often face business financing problems because they lack sufficient evidence to ensure operational security – the company is entirely new, not making sales, and it is unclear how it manages other obligations, finds clients, and works with them. These factors give the credit institution an impression of how the company handles financial obligations. Without such evidence, it is difficult to prove that the company will be able to pay loan installments.

Many financial institutions that provide business loans apply strict creditworthiness assessment rules and often reject loan applications from higher-risk clients. However, it is crucial to find out the real reason for the application rejection when faced with a negative response.

"To avoid hitting a wall, young companies without a credit history should seek financing opportunities from financial institutions that declare their favorable view of new companies. For example, we clearly state that we provide loans to companies that have been operating for at least a year. However, upon receiving a negative response, it is important not to immediately attribute it to the company's young age but to find out if something else caused the application rejection and try to address those reasons. There is a high chance that the same financial indicators will be considered when applying for financing to another institution, which could prevent obtaining a loan on favorable terms or not getting it at all," says Emilija Poškonienė, head of the business loans department at "FinoMark".

Giving Up Halfway

A multitude of conditions and extensive paperwork probably tires everyone, but often things are not as complicated as they seem, especially when there is someone who can efficiently advise you. For example, many company representatives are frightened by the required collateral, as many financial institutions consider it as real estate. Realizing that there is not enough property to pledge for a larger loan amount, company representatives stop seeking further solutions. However, according to the "FinoMark" representative, it is important not to give up and look into what other financial institutions offer: some of them do not limit themselves to real estate and allow pledging inventory, receivables, equipment, etc.

A similar situation occurs when companies see the amount of documentation and information about collateral and financial reports that need to be provided to financial institutions to obtain a business loan. Of course, this is not the easiest part of financing, but all these documents are necessary for the creditor to assess potential risks.

E. Poškonienė adds that these requirements should not be feared, as the financial institution is there to help clients manage as simply as possible. For example, the crowdfunding platform "FinoMark", when considering financing, asks for only the most necessary documents. The platform has a convenient self-service where company representatives can easily fill out the application, attach all the required documents, and see the application evaluation stage. If any questions arise, both when filling out the application and after the money has been disbursed, the platform's specialists are ready to help and, if necessary, offer the services of partners, such as appraisers, insurance brokers, who help to speed up all processes.

"You don't really need to worry about what documents to look for. We always recommend communicating with the platform's specialists, who help smoothly go through the entire business financing process: from consulting about collateral to explaining the level of detail required for the documents. If the client really wants financing and meets the requirements, we will do everything on our side to ensure the company receives financing services as easily and quickly as possible," explains the "FinoMark" representative.

Problems Arise After Getting a Loan

There are also cases when companies easily obtain financing, but all problems start when repaying the loan. Companies that receive funds for business development sometimes face unpleasant situations when, due to the fault of other parties, such as clients who do not intend to pay for goods or services, they cannot cover loan installments, damaging the company's credit history and reputation.

Trying to maintain relationships with clients or attempting to recover debts on their own, companies often delay starting the debt collection process, the debt accumulates and grows, and with significantly overdue loan installments, they themselves risk becoming insolvent.

According to E. Poškonienė, attempting to recover the debt on their own often ends with wasted time and no results. Such situations should not be neglected and should be resolved as soon as possible to preserve your credit history.

"There are many debt collection companies that help efficiently recover debts. To ensure that our clients can receive all necessary services in one place, we have started collaborating with the debt collection platform "Eskolos.lt", where "FinoMark" clients who have debts from third parties can sell the debt, immediately recovering the largest part of it," says the head of the business loans department at "FinoMark".