On Your Way: Getting Financing and Establishing Credit for your Small Business Part 2

In part 1 of this three-part series, we discussed the valuable role community banks play in the success of small business. This is a topic that deserves further attention.

In this article, you will be provided with guidance on what to look for, where to gather information and what questions to ask when choosing a bank to fuel your venture, build credit and keep it on a steady course of growth.

Unlike large, regional banks where vital decisions about your company’s future are most likely not made by the branch manager, but by a credit manager possibly located states away, a community bank provides a much better chance for you to have a face-to-face meeting with the actual decision maker.

“Community banks are an ideal choice, for the decision makers are usually accessible in person, they understand your community, have a smaller footprint in the market and may only be located in your city or county,” says Marilyn Landis, president and CEO of Basic Business Concepts, Inc. (www.basicbusiness.biz) and the U.S. Small Business Administration’s 2009 Financial Services Champion. “And because every bank is different and caters to a specific type of customer, it’s important for entrepreneurs to do a bit of investigating when searching for a banking partner.”
Whether you’re simply opening accounts or require a variety of services, such as securing a loan, credit card or line of credit, it’s essential to do a little digging until you find a bank that can meet your fundamental business needs. As well, it’s wise to seek out banks that offer special programs and are Small Business Administration (SBA) lenders, for their risk of default on loans is reduced, which makes your chances of securing capital better.

Equally important is selecting a bank that you feel comfortable with. The bank you choose to do business with is as vital of a relationship as that of yours with your lawyer or certified public accountant. You wouldn’t hire just anybody to draw up your legal documents or file your company’s taxes. Then, why would you randomly select a bank to work with? A strong relationship with a bank could open many doors for your business, get you through the gaps in cash flow and assist you in financing larger projects.

So, where do you begin looking to find the right bank for your business? Start by inquiring with friends and family who are entrenched in their communities and could provide valuable insight. They will have the scoop on who’s who and what’s what. Ask other small business owners in your area what banks they suggest and why. And, make an appointment with your local Small Business Development Center. The Association of Small Business Development Centers (ASBDC) – www.asbdc-us.org – has approximately 1,000 service centers across the country. The centers can provide you with lists of area banks.

Once you’ve narrowed down the banks you are considering approaching, Landis recommends interviewing them to find out if they’re the right fit. She suggests asking the following questions:

Who would make the loan decision?
What is its biggest concentration of customers?
What type of customers does it work with?
What suite of services does it offer?

“After you've done your homework and have decided on the bank you want to work with, you should be able to talk about your specific needs with your banking partner,” says Landis. “Discuss important details with them, such as how you will control your payments, what may be the best way to send a money wire to an international client, how you'll pay suppliers, and even if your cash flow is up, or -- hopefully not -- down.”

With this information, the bank can reach into its toolbox of solutions. Experts say allow them to help you to determine what products fit your requirements, but it isn't always cookie cutter. If it doesn't seem like their suggestion fits your business model, this is where you need to put it back into their court. Community banks, unlike rigid commercial banks, might be able to craft a more individualized solution for you. Remember, in small business one size doesn't fit all, and creating a good connection can help you in the long run to not only get what you need, but ensure smooth transactions.

Meanwhile, if financial know-how isn't one of your strong suits, look into some good free services. SCORE, or Counselors to America's Small Business, is a great resource and a partner with the U.S. Small Business Administration. They offer free business mentoring advice both online and through low-cost workshops nationwide with a very basic bootcamp covering financial topics. Reaching out and getting help can make all the difference in the world.

You’ve already demonstrated that you have a viable business model; however, if you don’t plan accordingly for success, your business might fail. It’s imperative that you know what you need to keep your company running like a well-oiled machine. This is when the hard question comes up: Are you meant to be a business owner or are you better off being an exceptional employee? It’s all about surviving the learning curve and mastering working on your business. And having the right banking partner could mean money in your pocket.

Visit Nolcha.com next week for part 3 of “On Your Way: Getting Financing and Establishing Credit for Your Small Business.”

-By Dawn K. Terrick, president and creative director of DKT Communications, Inc., a full-service custom publishing and marketing communications company.