Written by: Dominic DeCaro, Vice President of Small Business Banking
Even with great products or services many small businesses struggle to grow, and it’s often the case that entrepreneurs do not have the necessary financial support. Securing cost-effective financing is a critical component of any successful business. This can feel like the most daunting part of a business plan, but it doesn’t have to be. There are clear steps you can take to prepare your business to obtain the best financing available when you’re ready to expand.
1. Assess your initial financial resources. Small business owners have a variety of options when it comes to startup financing. From using your personal assets to borrowing money from various external sources (be it a family member who wants to invest or a bank with an attractive offer), consider what the best and most cost-effective way would be to get your business off the ground. There are pros and cons to each type of financing, and a good banker will be able to help you analyze the decision. Once you decide on your primary source of financing, you can build out a larger business plan based on what kind of debt you will take on.
2. Set up the basic financial tools for your business. Designated business accounts are essential to building a credit history and demonstrating your business’s level of sophistication. You should have a checking account, savings account, credit card and payment processing system that are strictly business-related. These will be essential assets when you present your business to bankers or potential investors, as they help demonstrate that you know how to set up a successful business.
3. Establish credit. Once you have designated business accounts set up, use them to start building a financial history. Learn how credit reports work and what lenders will look at when determining your eligibility for financing. It goes without saying, but when you receive a loan, follow the repayment plan. Never miss a payments and communicate with your banker early if there’s a risk you might be unable to. This will go a long way in showing potential investors that your business can be held accountable for debt.
4. Meet with your business banker in person. Your business banker should be a trusted ally because your success is directly related to the bank’s success. Ask questions about long-term planning so you know what benchmarks you should hit in its early years of operation so you can continue to grow. If your banker knows you are engaged and interested in understanding your business’s financial future and how to improve it, this will benefit you in the long run when you are ready to expand.
Big-picture financial planning can seem overwhelming, but entrepreneurs who take one step at a time and seek advice from knowledgeable professionals vastly increase their odds of success. If you’re ready to get started, set up a preliminary meeting with Washington Trust’s small business lending team. Our bankers have helped other local small businesses work through many of the same issues and can put you on the right track toward a successful growing business.
Dominic DeCaro is a small business banking relationship manager with over 17 years of banking experience evaluating small business customers’ financial needs. Assisting clients with products and services to help meet their everyday operating needs is a key part of what Dominic calls “private banking for the small business owner.” Some of these products include small business lines of credit, real estate financing, equipment loans and SBA financing. Dominic works with his customers to help them identify ways to save money, be more efficient and meet their growing business needs. He can be reached at [email protected] or 509.353.3846.
Washington Trust Bank