Common mistakes small businesses make when seeking financing (and how to avoid them)
Journey Capital TL;DR: Many small businesses face financing challenges not because they’re ineligible, but because of avoidable missteps. From borrowing more than necessary to submitting incomplete documents, common mistakes can delay or derail your funding. Knowing what to look out for, and how to prepare, can make the process smoother and more successful.
What to avoid when applying for business financing
Financing can help your business grow, invest, or stabilize operations. But small missteps can lead to rejections, higher costs, or undesirable repayment terms.
Here are the most common mistakes small businesses make, and how to avoid them.
Mistake 1: Not understanding the true cost of financing
How to avoid it:
- Look beyond the interest rate.
- Factor in fees, repayment terms, and total cost over time.
- Use online calculators or speak to a financial professional to compare options.
Mistake 2: Borrowing more than needed
How to avoid it:
- Determine exactly how much funding your business requires.
- Build a budget and borrow just enough to meet your needs.
- Avoid overborrowing to keep interest costs low and repayment manageable.
Mistake 3: Choosing the wrong type of financing
How to avoid it:
- Match the financing type to your use case and cash flow.
- Term loans are great for larger, longer-term needs.
- Lines of credit offer flexibility for short-term or ongoing expenses.
- Merchant cash advances work well for businesses with fluctuating revenue.
Mistake 4: Poor credit management
How to avoid it:
- Monitor your personal and business credit reports regularly.
- Correct errors and work to improve your score over time.
- Pay bills on time and reduce debt where possible.
Mistake 5: Submitting inaccurate or incomplete documentation
How to avoid it:
- Prepare documents in advance, including: Profit and loss statements, cash flow reports, tax returns, bank statements.
- Double-check all numbers and information for accuracy.
Mistake 6: Lack of preparation and planning
How to avoid it:
- Build a strong business plan with clear financial projections.
- Explain how the loan will be used and repaid.
- Prepare for questions about cash flow, revenue, and risks.
Mistake 7: Not exploring all available options
How to avoid it:
- Don’t settle for the first offer you get.
- Compare banks, credit unions, and alternative lenders.
- Look at approval speed, transparency, and repayment flexibility.
Mistake 8: Ignoring repayment terms and conditions
How to avoid it:
- Review all repayment details before signing.
- Understand payment frequency, early repayment rules, and late payment penalties.
- Choose terms that align with your cash flow and business operations.
Why choose Journey Capital?
At Journey Capital, we help Canadian small businesses navigate financing confidently. We provide a simple application process, flexible product options, and clear guidance so you can avoid common mistakes and secure the right funding for your needs.
FAQs
Product choice. Choose a financing product that fits your business goals, cash flow, and repayment ability. Don’t focus on rate alone.
Work with an accountant or financial advisor to review everything before applying.
You can still qualify. Focus on building a strong application and consider lenders like Journey Capital that look beyond credit scores.
Taking only what you need helps avoid unnecessary interest and keeps repayment affordable.
Compare lenders based on speed, support, transparency, flexibility, and overall fit for your business needs.
Avoid financing missteps and move forward with confidence. Apply online and discover clear, flexible financing options today.