Going Back to Basics for Business Capital
Capital is a catalyst. It is a necessary ingredient for a business to launch, grow, make an acquisition, transfer ownership, or weather challenging times. Lenders play a crucial role in helping businesses achieve their goals – and there are lots of things businesses can do to make the process smoother and more effective.
Whether amid economic uncertainty or in flush times, it’s always smart to start with the fundamentals of good credit: How to qualify for it, how to borrow it, and how to use it. Finding capital starts with a good partner who can guide you every step of the way:
Talk to your banker earlier rather than later
It’s important to explore financing at the same time you are considering purchase agreements, ownership stakes, equipment investments or other strategic discussions. Depending what you are doing, how you finance it and how you structure a deal can have a major impact on the bottom line because of tax impacts or loan terms.
Pay attention to the “5 C’s” lenders and investors look for
Character, capacity, capital, collateral and conditions are the things that indicate if your business is a strong candidate for credit – and they are also things you need to work on every day. Pay debt on time, don’t take on too much debt, keep a cash reserve, keep assets in good condition and borrow intelligently for good reasons, and you’ll have a much easier time raising needed capital.
Refresh your business plan so you can be open to opportunities
The key idea here is to think about how your business would appear to an outside party. Are your books balanced? Do you have a good business plan? Are your goals realistic? Especially during the COVID-19 era, businesses should update their business plans and projections and keep their balance sheet clean. This can position you well to get capital if an opportunity comes up, and streamlines the process if you are ready to sell.
Focus on investments that pay long-term dividends
When rates are low, high-impact investments become more affordable. In manufacturing that might mean automation, or in other businesses it might mean upgrades to computer platforms, enterprise resource planning software and other sophisticated tools to improve efficiency. Your banking advisor can help you judge if an investment is worth it.
Don’t be shy asking for help or advice
Business capital is complex, and it’s not something most business owners need to deal with on a daily basis. It’s worth building a relationship with an advisor who knows banking and finance, the same way you do with legal experts and accountants so you can move quickly and correctly when opportunity arises.
Whatever your need for capital may be, a business advisor at Alerus is ready to help you. We have a long history of helping businesses through all stages of development and all kinds of transformations, and our professionals will get to know you and your goals so they can recommend and help execute the best financial solution. Reach out today and learn how we can help your business.