July 3, 2020

How to choose a financial product (without losing your mind)

How to choose a financial product (without losing your mind)

Researching finance options is time-consuming and confusing. But there are ways to beat the pressure - and the pain.

Believe it or not, there are ways to finance your SME without wasting much time and losing your mind in the process. This article shows you how to make finance options work for you. Where you can avoid feeling like you’re losing out and making a decision that harms your business in the future.

Let’s assume you’ve just bought a new piece of furniture that needs putting together.

And you’ve promised your partner that it’ll be done today. What do you need to get started? Let’s see:

-The instructions.
-A hammer.
-A Drill (or screwdriver).
-Nuts, bolts and screws.
-A cup of builder’s tea.
-A stress ball to stop you from smashing the parts in frustration.

Ready to go?

Of course not. You might have the hammer, but the drill is nowhere in sight. You’re pretty sure you have a selection of screws, though you may (or may not) have nuts and bolts. What should you do at this point?

The slightly obvious answer is that you have to rush off to the hardware store to pick up your missing items, which means your partner may not get to sit on their new sofa today - and you’re left completely frazzled.

This “frazzled” feeling is what most of us go through when we’re dealing with finding a finance option for our small business. We (sort of) know how finance works, and we know that we need it now. However, when we start looking for the best, fairest and fastest option we suddenly feel like we know nothing. Like we need to know so much more before we can make an informed decision. That’s when we scramble to research the best options leaving us even more perplexed.

Which is why this article covers three main points about researching finance options:

-Why we tend to get confused during our research

-Why researching in advance is more important than you think

-How to select a finance partner with little (or no) research at all

1- Let’s start with the first point: why we get confused during research.

Do you remember the last time you had to make such an important (and perhaps urgent) decision? 

Doesn’t it seem that the time we have to make a fast decision, is often a time when we’re inundated with information. Buried in data. Death by analysis. A decision that should (and probably needs to) be decided in a matter of hours, takes days, or even weeks. This delay is due to our dependence on research.

Finance companies are fantastic at confusing us. The business of money is a world full of abbreviations - like CDO, ETF and AIR - leaving us normal folk wondering what the hell all of this means.

The reason why we depend so much on research is because we feel a little intimidated by the depth of our knowledge.

And many finance companies know this.

We rightly assume that reading blogs and “expert” columns will help us to understand the maze of financial options available. But the more we read the financial talk of many “experts” we lose concentration - sometimes conceding to the easiest option.

So, we are in a rush, we research facts on the internet, end up at a dead end, and have little to show for our hard work. If there’s any good news, it’s that all of us start the journey down this painful path only to find that there is a better way.

It’s called research in advance. And it’s a lot more important than you may have realised. So let’s continue onto our next point.

2- Why doing your research in advance is more important than you think

One of my favourite activities is writing. Every morning I wake up, take a cold shower, read for a bit and then write. 

However, if you looked at my laptop you’d notice that I don’t solely rely on my memory. I have a vast database of information that I have continually saved over many years. A database I can dip into whenever I need some extra inspiration or to back up some point I’ve made with solid facts.

I do this for speed and security

If the information is sourced in advance, I don’t have to go searching for it on the internet. That way I make sure I get my facts straight and my references spot on. That ability to pull it up in real-time gives me the security that my research is correct and fits well into the piece.

And whether you’re building furniture or financing your business, preparing well in advance is an essential time and stress saver.

However, there are other benefits of advance research that we tend to discount

The first is that when we are prepared we are less likely to be distracted away from the daily activities of running a small business.

When I have the research for an article on building furniture in my database, that’s a whole load of time and energy saved for writing a better article. The same goes for you. If you have your research done in advance, when a client pays late. Or worse, not at all. You have your database on hand, so you’re well informed before making a quick financing decision.

And that’s why most of your research needs to be done in advance.

You can use a tool like Evernote to store your research. With Evernote, you can save articles and videos that store all in one place. You can then search for the information, quickly - saving you time and stress.

Therefore, if I read something that is relevant to finance, business or psychology (subjects I write about) I can save it in advance. Then, when I need it, I can dip into my database and find research, five months or even five years from now.

You know this is true because you’ve experienced it.

It’s a little like going on a package holiday. Sure, the fly by the seat of your pants world explorer option sure feels more exciting. But when you arrive at your destination and a driver awaits with your name on a placard and drives you safely to your hotel room, you’ll be damn happy you aren’t slugging your luggage down the street looking for a bus to find the hotel’s that still have vacant rooms.

When you prepare in advance you give yourself the greatest chance of running and growing a successful business.

You can be sure that at some point you’ll need the research.

The next time your client fails to pay. Or says they demand 60 day payment terms, you’ll have the information stored away and ready for you to take action now.

But what about if you’re reading this now and you haven’t done any research. And you need finance immediately. What should you do then? This takes us to the third part of the article: How to select a finance partner with little (or no) research at all.

3- What should you do when you have no research in place?

Let’s take a step back and review where we are. We have no research in place; we need to borrow money. But do we know what we’re looking for? A loan? Invoice factoring? A line of credit?

So many options and such little information leads to terrible decisions.

If you need the money now and you don’t have time to research, you’ll need to find the help of someone who knows what they’re talking about.

A finance expert could work. But you’d have to pay them a lot of money. Talking to finance providers this early could lead you down the wrong path. Often, they’ll just tell you what you want to hear.

You need someone that you trust. And the best person to ask is another SME owner who works in the same industry as you and who has borrowed money to further their business. They will be the one who knows who to avoid and who provides a fair and honest service. 
You can ask them:

-What type of finance they’ve used.
-Which providers offer the best service for SMEs.
-Why they needed the finance in the first place.
-What the result was of using their preferred provider.
-How long the money took to pay back and how much it cost.

Just the same questions that you would ask Google - but asking a friend will give you more honest answers. They don’t want to see you get hurt.

This is the best option if you don’t have time to do the required research.

But, as always, it’s important to learn about how finance works for SMEs because you never know the next time you’ll need it. It gives you the ability to go into a conversation with a salesperson at a finance company full of knowledge. You’ll no longer be confused by their abbreviations or led astray by their canny sales techniques.

In most cases, if you’ve done some research and spoken to a handful of trusted friends you’ll have enough information to make a good decision.

And now that we’re done with the article, I’ll go back to building my furniture.

Has anyone seen my drill?

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