Small businesses have long been part of the economic landscape, but a wave of entrepreneurial growth is on the horizon and expected to greatly transform the scene. Changing conditions are allowing for an increase of long-term entrepreneurship: technology is breaking down barriers to starting a business; software with higher computing power and sever storage options are helping entrepreneurs start their businesses at a lower cost compared to previous years. Increased advocacy is also spurring change. Organizations are asking the government for policies to cultivate entrepreneurial growth.
Innovative businesses that are expected to grow in the coming year are ones that are using technology to revolutionize various industries, such as improving the way healthcare organizations access electronic medical records. Simply put, entrepreneurship need not be the latest shinny new toy or create social media buzz; rather, entrepreneurs on the rise are those showing how they can change lives.
Another reason spurring entrepreneurial growth is the millennial business owner. As more millennials approach the “peak age”—between 30 to 40 years old—for starting a business, the innovations for businesses will continue to grow. Simply put, these are among the best of times to start a business.
Shopping for Banks That Work With Your Business
Borrowing money for your business takes more than visiting your closest bank and getting approved for a loan. Ideally, you choose a banker who is willing to work with you to finance your business, address issues that arise, or provide services that are within your budget.
When deciding on a bank for your business loan, here are some tips to help you determine the best banker for your needs:
Find out the bank’s loan or lending specialty. Some banks may focus on leading for small businesses while other banks focus on other services. For example, ABLV Bank on Linkedinemphasizes that it offers loans for further development of large businesses.
Ask the largest loan that the banker can approve without needing additional authorization.
Determine your strengths in terms of getting a loan. Some banks determine loans by credit score, and other banks, typically smaller and regional banks, analyze a borrower’s character to determine a loan amount.
Pin down the fee rates; sometimes a small bank has lower rates than a larger institution.
Identify whether the bank works with the U.S. Small Business Administration loan system, an option that you may need to fund your business.
Find out about extra benefits offered by the bank, such as online banking services or accounting assistance. Some banks also help with sending invoices or collecting payments on your behalf. While extras benefits enhance the banking process, still choice a bank that you trust and feel comfortable with.
Consider that you’re investing in a long-term relationship with your bank. You need services immediately as well a year or two down the road. Make sure that you’re selecting a bank that will work with you for the long haul.
Type of Loans for Each Phase in the Business Life Cycle
Every business has a life cycle, and transitioning from each life cycle stage is going to require finances. The various life cycle stages of an entrepreneurial venture are the following: seed or start up, growth, expansion, and maturity. Each life cycle stage requires funds to execute specific goals. That’s why it’s important for businesses to understand what they need before they approach a bank.The seed and start up stage is straightforward: a business owner needs funds to launch the business. Loans that have been developed for this specific purpose and include eligibility requirements, reduced down payment requirements, or microloan options. Owners usually use loans acquired during the seed or start up phase to buy inventory, hire employees, help with cash flow, or buy or lease equipment. Sometimes business owners also use a credit card line to help expand their purchasing power.
The growth stage is when a business is finally gaining traction. In this stage, an owner is able to invest the profits back into the business to grow or expand. For example, the owner may look into adding a new store location, hire more employees, or increase inventory or production. Specific types of loans that are designed of the growth phase include short- or long-term expansion loans or bridge loans.
The established or expansion stage means that the business is profitable, meaning the owner has a handle on generating money. Typically, a loan in this business phase is used for acquiring another business or making long-term investments to the property, equipment, or plant facility.
Of course, last but not least in the business life cycle is when the company has reach maturity. At this point, the owner is deciding whether to close the business or sell, so there’s no need for additional loans.
As you explore your options for banks and loans to finance your business, remember that you want a bank who understands your industry and has resources to help make your business plan into a reality.