Everyone wants more cash for their business. However, there are certain barriers that may stop you from accessing this cash from certain institutions. If your business is not bankable then you might have a problem securing the necessary funds to grow and scale your business.
What Does Being Bankable Mean?
Being bankable really means having the ability to get traditional financing packages from a financial institution. This is just a fancy way to say that banks will want to loan your business money.
Why It’s Important to Be Bankable
It’s important to be bankable because you’ll have access to more money. Whether you’re just starting your business or you’re decades in, you’ll realize that you definitely need money to make money. While debt may seem scary, sometimes it’s necessary to grow your business. Loans can help you to:
Expand your business
Instead of using up all the money that your business needs to operate, you can use a loan to grow your business. You can pay to do more advertising, market your business better or invest in your client/customer relationships. You’ll know what your business needs to expand, a loan is simply a vehicle for that change.
If your small business sells goods then you know how hard it can be to keep up with inventory. You want to keep up with demand but you don’t want to hurt your cash flow. You may want to offer a variety but doing so requires investing in these products before you start selling them. For some business owners, this causes a strain on the finances, a loan can offset the cost.
Keep the Lights On In Your Business
Cash flow is important in a business, whoever you may be dealing with unpaid invoices or have products that haven’t been sold yet. You’ll need the money from invoices and sale of the products to do other things in your business like taking care of your operational costs. Sometimes a loan is what you’ll need to keep the lights on in your business.
Have the Best Technology
If your business requires the use of equipment, you know how expensive they can be. If you want to have the best technology but can’t afford it, a loan can help you with that. Even if you’re not concerned about the best technology and just want a piece of equipment that simply gets its job done, a loan can be your best friend.
How to Become Bankable
Becoming bankable isn’t something that will happen overnight. Even if you don’t see a need for a loan in your business now, working on being bankable will save you so much time if you’ll ever need a loan in the future. Here are some ways to become bankable:
Have a Great Business Plan
Yes, the quality of your business plan affects your chances of getting a loan. Your business plan needs to clearly outline what your business is about, how you’re going to make money, financial projections as well as a summary of your market and products.
If you don’t have a solid business plan, don’t worry, you can get our Roadmap to Business Success Template. This product will help you brainstorm and properly flesh out your business plan so that you become bankable and access the funds you need.
2. Be in a Specific Industry
Some industries have a harder time accessing loans than others. According to Cayenne Consulting, food service, retail, consulting, work at home, and telemarketing businesses are usually avoided by lenders. That’s not to say you will never get a loan but it will take a little more work to find the right financial institution to do it.
3. Make Sure You Have The Necessary Paperwork In Order
If you need money from a financial institution you’ll need to have your paperwork in order. Disorganization is a red flag for lenders. You’ll need up-to-date and accurate financial records which include tax information. Bookkeeping is very important if you want access to money.
If you are just starting your business or ready to get it established, check out our checklist for getting your business established in the United States.
In addition to that, you’ll be better able to see your finances better if you’re organized. You’ll need to track and account for all your financial transactions. While you can use pen and paper, it’s better to just invest in accounting software like Quickbooks. Quickbooks makes organization so much easier and saves you time.
4. Make Sure Both Your Personal and Business Finances Are In Order
Lenders look at both your personal finances and your business finances. There are many reasons why you may end up with a low credit score but this could seriously hurt your chances of getting much-needed money. It’s recommended that as a small business, you’ll need a credit score of 700 and above.
We suggest seeking financial advice if you need your credit score to be higher. However, one thing we can suggest is accessing a smaller loan that you do qualify for and will have no problems paying. This will help you look like a reliable payer.
Don’t forget to refrain from commingling personal finances with business finances so you’ll need them in different bank accounts.