Starting a business is hard. Many entrepreneurs have the ideas, products, services and drive to succeed in their area of expertise. However, running a company may be more than they bargained for. It requires many varied duties that may be beyond their expertise, in which case, they need to seek out a trusted partner.
In working with my customers, a large number of small business owners worry about having enough money to run their business. In the case of start-ups, I find that a significant number of them underestimate the funds needed to start and run their business and that adds an additional level of stress.
Managing finances can be one of the most challenging responsibilities for small business owners. When used properly, business credit can provide the necessary capital to manage fluctuations in cash flow. That increases a business owner's ability to pursue opportunities to improve and grow the business. This is where their trusted partner can help them understand their credit options so they can take advantage of financing structures that meet their needs.
It's the banker's responsibility to make it as easy and clear as possible for business owners to decide which option is best -- and why. In general, credit cards are most appropriate for everyday business purchases such as supplies, office equipment or monthly vendor payments. In contrast, a business line of credit typically is used for smaller purchases, spread out over time. A business loan is a good option if the company needs to access all the funds at once.
Deciding if and when business financing is right for your business can be a tough. Here are some key factors that help business owners understand what will be used to evaluate their credit application:
- Credit History: How has the business owner managed previous credit?
- Ability to Repay: Is the business profitable? Does it have positive cash flow?
- Capital: Does the business owner have enough investment of personal capital in the business?
- Collateral: Does the business owner have assets that can be used as collateral to secure the loan?
- Business Experience: Does the business owner have experience in the industry?
Business owners who better understand the factors used to determine creditworthiness can be more prepared and understand the process more.
They are also looking for clear and easy-to-understand information before they apply for credit. During the application process, they want payment terms to be clearly defined in addition to explanations and time frames along the way.
Financing a business without the right support and tools is a complex task. While some business owners are credit-ready, others need guidance on how to build a successful credit profile. Your lender can be your trusted partner who can help educate business owners on what it takes to be approved and be there to guide you through the process. There are also many resources that your lender can connect you with to help you navigate through not just the lending process, but any other aspects of your business.
My passion is being a trusted resource for my existing business customers and/or prospects. The more I can help them with their business needs, the more they can focus on their business.