Top Tips for Accessing Financing Amid Economic Uncertainty
Credit access is a vital lifeline for many small businesses, and in an uncertain economy, it becomes even more critical. Companies with access to financing are often better positioned to weather potential economic shocks. That’s because they can rely on that credit to maintain the cash flow required to carry them through business slowdowns or other challenges in turbulent times.
In addition to making companies more resilient, credit can allow them to take advantage of opportunities that often arise during economic uncertainty. Take these four key steps to set yourself up for success when and if your business needs to borrow money.
1. Build your business credit
For a brand-new business, your personal and business credit may be intertwined, so it’s essential to maintain good personal credit. But while many entrepreneurs finance their companies through personal credit cards or personal loans, it’s also important to start building up your company’s business credit.
The first step is setting up a separate business bank account and running all company transactions through that account. Over time, you can use that account to start building up separate credit on behalf of your business.
One crucial step to building a credit history for your business is to open a business credit card and use it responsibly. Building credit for a business requires many of the same habits as building personal credit. Make sure you pay all your bills on time and try to keep your overall debt levels low. Periodically check your business credit report to see your progress and ensure it contains no erroneous information.
2. Understand different types of capital
Several types of loans are available to small businesses, including bank-issued loans backed by the Small Business Administration (SBA). In general, SBA loans may provide longer payment options and more flexible terms than other types of business debt. No matter what type of loan you get, it’s important to understand the terms, including the repayment plan, length of the loan, and interest rate.
If you don’t meet traditional credit guidelines, other types of loans may still help. For example, Old National launched a new program this year, Empowerment Small Business Loans, to help women and minorities access financing. That program allows the bank to use a longer amortization schedule and reduce payments.
Small businesses should also explore whether they’re eligible for any other funding sources, such as through grants or low-interest loans available through state or local government or nonprofits.
3. Create a banking relationship
According to the National Federation for Independent Businesses, about a quarter of small business owners say that their current credit needs are met, and about two-thirds say that they are not currently interested in a loan, according to the National Federation for Independent Businesses. But even companies that don’t need financing now might consider taking steps to create access in case they need it in the future.
In addition to having good credit, having a solid relationship with a lender can be key to quickly getting financing when needed. That relationship typically begins with a business checking account. Get to know your banker so you’re not introducing yourself and your business for the first time when you need a loan.
4. Set yourself up for success
You’ll also want to focus on keeping good financial records for your business to easily provide any documentation that a lender might want to see for loan approval. That includes not only a balance sheet and income statement but also a business plan that can show a lender that you’ve thought about the future of the business and have a clear idea of how you’ll use the financing.
Then, you can work with the lender to get pre-approved for a loan or open a line of credit that you can access whenever you need it.
Working with Old National
At Old National, we believe that relationships and results matter, and we’re dedicated to helping small business owners access financing to protect and grow their businesses. We have experienced local lenders and flexible lending solutions that can help you meet your business goals.
Get connected with an Old National Small Business Banker for more insights today!