FINANCIAL LITERACY LEARNING CENTER
SMALL BUSINESS
BANKING SERVICES AND PLANNING FOR A HEALTHY BUSINESS
CHOOSING THE RIGHT BANK FOR YOUR UNIQUE BUSINESS NEEDS CAN HELP YOUR BUSINESS RUN MORE SMOOTHLY
BUSINESS BANKING FUNDAMENTALS
There are several factors to consider when choosing the right bank for your unique business needs. Here are some helpful tips to help you choose a bank, along with things to keep in mind that will help you run a successful business. Be sure to choose a bank that offers the products/services, customer service, account access and additional banking services that will suit your needs. Ask about payroll services, cash management services, business debit cards, merchant processing services (credit cards, debit cards, gift cards), commercial lending (loan details, features, terms, and loan types), business credit cards, financing, and wealth management. No “comingling”—open up a separate checking and savings account for your business. Know what the account limitations and restrictions are. Take advantage of remote deposit scanners and online access. This is a good starting point; however, it is important to build a strong relationship with a bank to really take advantage of all they have to offer.
IMPROVE CHANCES OF GETTING A LOAN
To improve your chances of getting a loan, follow these simple steps. Develop the five C’s of credit: Capacity (how you will repay the loan), capital (money you’ve personally invested), character (personal integrity), conditions (external factors that could affect your ability to repay the loan) and collateral (form of security you provide the bank). This will help to strengthen your business credit score. Do your homework and ask questions. There are countless different types of loans and programs out there for small businesses, so do your research to make sure you are getting what is best for your business. Build a long-term relationship with your banker. They will be a great resource for you and your business. Lastly, improve your personal credit score. Personal credit scores contain much more information than business credit scores and can therefore influence whether you can get a loan or not.
THE 4-STEP PLANNING MODEL FOR A HEALTHY BUSINESS
Step 1 – Back-of-the-napkin plan: Go or no go?
In this step, you do preliminary research and planning. The point here is to determine if business ownership is a good fit for you. Most of the time, you don’t have any concrete plans yet, just ideas. It can also help to talk to other business owners in a similar field to get ideas.
Step 2 – Resource plan: What do I need to go?
After deciding that starting a business is the right move for yourself, it’s time to start putting your ideas into action. Start by creating an opening balance sheet. Figure out what you need to get your business going, such as space, equipment, staff and other expenses necessary to open and run a business for about six months. A good rule of thumb is to borrow no more than 200% of the money you invest in your business. A resource plan will help you to identify key numbers and make decisions. At this stage, it’s a good idea to start looking into banks and developing a long-term relationship with a banker.
Step 3 – Business plan: How will I finance my business?
This stage requires more research, planning and detailed financials. It’s a good idea to see what competitors in the market are doing and even talk to other businesses. All this information will be used to create a business plan, or compelling story as to why your business will be a success. You can then use this to sell your story to banks and other potential investors to obtain financing.
Step 4 – Action plan: How will I manage a healthy business?
In the last step for planning a healthy business, you will create a living document that will continuously need to be updated as times change. Customers will come and go, vendors will go out of business, and prices will change.
Having a flexible plan in place and creating SMART (specific, measurable, attainable, relevant, timely) goals will help you to strategize your time and identify top priorities to focus on.
