As a small business owner, the thought of getting funding for your small business is exciting. Just thinking about all of this things you can use the funding for, blows your mind doesn’t it? The money would help so much! But, this excitement is what causes some of the biggest small business funding mistakes to happen, and nobody wants a mistake to be the reason why you and your small business didn’t get funding.

In order to avoid the biggest small business funding mistakes, you must first know what they are.

5 Biggest Small Business Funding Mistakes

The last thing you want to do is make a mistake when you’re looking for and applying for funding for your small business, especially when the funds could mean the difference between success and failure of your small business.

While there are so many different reasons one can make a mistake when searching and applying for funding, these are the 5 of the biggest small business mistakes that entrepreneurs across Canada make.

#1: Applying for funding too late (or too early)

#2: Applying for funding without a business plan

#3: Not knowing what you need (financially)

#4: Applying for anything and everything

#5: Applying for too much money

Applying for funding too late (or too early)

One of the biggest small business funding mistakes many business owners make is simply applying for financial help too early or too late.

A typical business owner needs to apply for funding 3 to 6 months (if not longer) prior to when they need the funds by.

While certain government funding programs, or bank loans, or private investors may provide funding quicker, it is always better to give yourself plenty of time to search for the funds, to apply for the funding and to wait to obtain the funds.

The last thing you want is to apply too late and miss the deadline when the funds are really needed by.

The same can be said for applying to early.

If your business isn’t ready as of yet, applying to early for funding is another small business funding mistake many people make – and simply get denied.

If you don’t have a business plan, don’t have a business that’s starting or about to start – you’re out of luck and no need to apply just yet.

Applying for funding without a business plan

Another critical small business funding mistake is applying for funding without a proper business plan!

And no, a business plan (in your head) is not a business plan.

A proper business plan isn’t difficult do to, especially if you know what you want to do. You can always use a tool such as our Business Plan Builder Tool to get it done right.

The business plan, if done right will tell the bank, investor or the government funding agency all about your business, what you want to do, how you’re doing it, how you will make money, what you need (financially speaking) and the process of it all.

Applying for funding without a business plan is a sure way to get denied.

Not knowing what you need (financially)

If you have a business plan this is a section that should be pretty clear and obvious to you. As a proper business plan will have your funding needs outlined and broken down.

A small business funding mistake that many entrepreneurs who do have a business plan often make (and those without a plan), is not explaining the funding needs clearly.

How can you ask for funding if you don’t know what you need funding for.

Sure everyone can use the money – but why would anybody give you any if you don’t know how to explain yourself and what you need the funds for?

Applying for anything and everything

A real serious and dangerous situation, and a critical small business funding mistake that some business owners make is applying for anything and everything.

For example, the government of Canada has hundreds of funding programs small business owners can apply for. But not all of them are right for everyone, so you as the business owner have to  know your funding needs, have to meet the criteria of these programs and apply only to those that are right for you otherwise, you’re wasting a lot of time.

At times when funding is needed, business owners are willing to do anything to get the money. Sometimes this can mean taking on credit cards, lines of credit, high interest private loans, government loans, private investors, borrowing from family and friends…etc Eventually, this can get too much and can bankrupt you and your business pretty quickly.

To avoid this type of mistake, only apply to the proper funding sources and for the amount of money you need (and know can pay back).

Applying for too much money

Similar to the small business funding mistake mentioned above, where certain business owners apply to anything and everything, many make the mistake of applying for too much money.

While having a lot of money available in your business is great, it’s not always.

Borrowing too much (if you’re not in need of it), could put you in financial trouble. Not only do you have to pay interest on the money borrowed, but depending on where the money is borrowed from it could result in equity exchange, issues with our credit score, inability to borrow more money down the road and it’s always easy to spend money when you have it.

A simple rule to ensure success is to apply for only the money that you need for your business – and of course as said earlier, only the money that you know you could pay back.

How to avoid these small business funding mistakes

Now that you know the mistakes small business owners make when looking for funding for their business, avoiding them is critical.

Moving forward as a small business owner be sure to complete your business plan, as this will take care of a few of the critical steps needed to understand your funding needs.

Be sure to give yourself plenty of time before you really need the funds, so apply early (but not too early).

With your business plan, figure out what you need (how much and what for), and only apply to the trusted sources such as government funding agencies or banks, as they usually are the best and most reputable to deal with.

Finally, borrow only the funds that you need and know that you can pay back.

Be sure to avoid making the 5 of the biggest small business funding mistakes we mentioned above and you are good to go with your funding search.