Is a Small Business Loan Right for Me?
73% of small businesses used financing in the last 12 months (SBA 2015)
I understand the thrill of entrepreneurship and the challenge of needing outside funds to fuel your business dreams and goals. I am in the unique position of being a small business lender and co-owner of a small business. I work and socialize with small business owners, would be business owners, and I hear business ideas in all stages. When seeking financing for your next project ask yourself if a bank loan is a good fit for your business startup or expansion. Use the following questions as a guide to assess the strength of your business proposal for you and the bank.
Can I pay back the loan? Cash is king. Calculate your cash flow by determining your starting cash (the money you have on hand at the beginning of the month), then add cash-in (all money you receive in sales and paid receivables in a given month), and subtract cash out (all expenses for the month). The answer is your monthly cash flow, multiply by 12 for the annual cash flow for your business.
Will I pay back the loan? This is a question of character and is determined in part by looking at your larger financial picture such as credit score; do you have a history of paying your bills on time, an account history, or personal relationship with the bank? If you know you don’t have good credit, a bank loan is probably not a good fit and it would be best to take some time and work with your bank on behaviors that can help to improve your credit before taking on more debt.
What if my business is not successful and I can’t pay back the loan? All small business loans require collateral in the form of a building, business assets, or with the business owner (You) signing a personal guarantee. This means if you can’t pay back the loan the bank can claim your pledged business assets, a personal guarantee means you are taking personal responsibility for repayment of the loan, if your business fails the bank can claim your personal assets.
Answer these questions honestly and work with a banker you trust to have the success of your business in mind when recommending products for your capital and cash-flow needs.
Branch Manager II
Emprise Bank - 21st & Webb