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SCORE ExpertAnswers 

February 2012
7 Tips for Financing Your Business
David Solís
Bank of America, Small Business Division
Expert Advice for Small Business Owners

This month David Solís, National Sales Executive with Bank of America's Small Business Division, shares expert tips on coming up with a financing strategy that's right for you!

 Download Guide: Tips for Financing Your Business


Q: What's the general "state of the market" for small business financing - have conditions stabilized, or are lenders still extremely cautious?

  

A: While the economy remains fragile, both in the U.S. and abroad, it does appear to be stabilizing. Traditional forms of business financing are available to small business owners. Banks are competing with one another aggressively for all good loans. Caution is inevitable given the past few years, but that simply means making reasonable requests of clients, such as open dialogue about their business, the operating history, current and future plans, and up-to-date financial statements.


Q: Lenders have always looked for a sound business plan from aspiring small business owners. But are they scrutinizing some elements more than others these days?

  

A: A company's historical performance is critical. A strong repayment history, proper use of credit facilities and a relatively stable financial position all bode well for a business owner seeking capital for new strategies. Lenders want to talk with clients about their plans so they can identify the best instrument, structure, and overall set of solutions to help the business achieve its goals. 


Q: In addition to the fundamental business plan information (cash flow projects, marketing plan, etc.), are there any elements or "intangible" aspects that will help a small business proposal make a positive impression?

  

A: Any lender or investor will always look for as many tangible aspects as possible to ensure a good loan or investment. Intangibles may include a business owner's background, the strength of their board or management team and, of course, the story. What is the plan, and how convincing is it?


Q: For owners of growing businesses, what factors will give them a leg up if they're looking for additional capital this year?

  

A: Positive financial trends, and properly prepared financial statements and organizational information about the company will reduce questions from your lender and speed up the loan process. Small business lenders are looking at assets, liabilities, business and personal net worth, and cash flow coverage ratios.


Q: Are bank loans always the best option for small business financing?

  

A: Positive financial trends, and properly prepared financial statements and organizational information about the company will reduce questions from your lender and speed up the loan process. Small business lenders are looking at assets, liabilities, business and personal net worth, and cash flow coverage ratios.


Q: For microbusinesses and one-person enterprises, what are some tips for keeping one's business and personal credit separate?

  

A: Clearly identify assets and operations associated with the incorporated business versus those under an individual's name. Establishing a clear payment history under an incorporated name also helps.


Q: Similarly, what are some critical things to know about small business credit?

  

A: The more time a business owner can take to learn about how to properly leverage credit, the better. Too much or too little credit isn't optimal, and using the wrong instruments to do certain things isn't advisable. For example, you would not want to use something that has to be paid off in a very short period - a credit card or traditional line of credit - to purchase a big-ticket item with a long shelf life like a delivery van.


 There's more! Download the complete ExpertAnswers for
    February with David Solís:
 Tips for Financing Your Business


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