Small business owners can find it difficult to access capital when needed. Many small companies are undercapitalized, lack established financial histories, and lack solid cash flow. These issues, coupled with a lack of awareness of where to go to access capital, can often leave small business owners feeling frustrated and alone.
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Check out these tips to break down some of the barriers:
Develop a business plan. This is a great opportunity for most small business owners. Learning how to write a business plan is an essential first step – It explains what product or service the company offers, the company’s financial goals and how the company can address any environmental or market risks. Business plans determine what the desired goal is and how it is to be achieved. It also serves as a resource for potential investors and lenders, detailing current financial status, revenue streams, and the fulfillment of revenue projections.
Organize your finances. It’s important to set up a checking and savings account dedicated to business and separate from personal accounts. A solid financial foundation creates a solid business platform and allows business owners to build creditworthiness and financial stability. Also, personal and business finances are important and can affect funding. On the business side, a bank will determine if the company is generating positive cash flow. On the personal side, a bank wants to know if there is enough income to pay not only for the current debt, but also for the debt that has been applied for. Accurate financial data is critical to determining the company’s financial needs.
Build relationships with critical partners. It can take a village! Make sure the partners are aligned to support the business, including a lawyer, an accountant, as well as a small business banker. Good relationships with these partners are important to manage the changes in the business life cycle as the company grows and to determine if finances are in order before seeking funding. use resources Building other relationships can also help with potential funding options, e.g. For example, connecting to a Community Development Financial Institution (CFDI) that can also help a small business access capital.
Demonstrate a consistent and positive flow of funds over time. A positive cash flow is crucial for short- and long-term financial success. Small business owners need to make the most of their money by monitoring expenses, collecting payments quickly, and utilizing resources that can make cash flow management more convenient. Owners should design a cash flow projection to provide additional control over cash flow and get a clearer picture of the company’s financial health.
Planning is key for small business owners looking to access capital. In fact, planning and preparing business finances ahead of time might be the most important part of getting a “yes” and accessing the funding you need! Small business owners shouldn’t wait until capital is needed to look for it. Instead, they should organize themselves financially, create a plan, reach out to partners, and reap the many benefits Web sources available for small businesses.
Author: Don Pearson is a regional bank director for Wells Fargo.