Get Your Business Ready for the Bank

loanreadyA newly renovated building close to Darla’s home was the dream that reignited her spirit.  She was excited to have found a space with a surge in small business growth. Darla lived only a few minutes away and each day she’d pass by and read the sign on the window: “For Sale – Immediate Occupancy.” She imagined opening day walking through the intricately designed hardwood doors and welcoming her small business neighbors. From that point on she began to affirm, “This is the perfect location for me to transition from a home-based business.” In fact, it was the same vision she had written in her business plan over ten years ago.

Location. Location. And Finance?

Where have you dreamed of taking your business? Has it involved expansion? For many work-at-home entrepreneurs the thought may appear far off. When you have a good business model that your customers value, expansion creeps up on you faster than you know. When opportunity knocks (and it will appear) you should be ready to answer. Part of readiness is having the right amount of cash to move forward.

In Darla’s case, instincts told her that the business was spending more than it collects in sales. This was apparent because she was using credit cards to pay the bills and taking money out of personal savings. As good as the new sales potential may be, she could not afford the additional costs without outside funding.

Like so many others who work-at-home today you may find yourself in the cash needs dilemma and look for help from a bank. Before make sure that you have these items covered:

  • Balance Sheet listing the Assets (what you own), Liabilities (what you owe), and Equity (what you have invested in the company so far)
  • Income Statement showing your total sales, expenses, and net profit or loss
  • Cash Flow Projection – shows a 3-5 year forecast of sources of cash coming in and going out over a period of time

It makes no difference if you plan to fund a building, new equipment or a marketing campaign, it all boils down to this. When you sit down with a request for a loan, have financials that back your vision. At the end of the day, what matters most is being able to convince your lender.

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7 thoughts on “Get Your Business Ready for the Bank

  1. Very good point. Separating your business income and expenses and your personal money is important.

  2. Benita-
    This is definitely where I fall short!!! From day one of starting my event design business I have been a disaster at finances and not only am I usually not sure about what is coming in and out, but I often find myself at tax time scrambling. I have gotten better. The first year was a disaster. I still need to do a better job with projections and work on my expenditures. I have not needed to take a loan out…knock on wood…but if my business continues to grow I may need to in order to move from a home based business into a commercial space, which is the goal. Thank you for sharing.

    • Mackie, I am happy to hear that you are making progress. Know that you are not alone. There are many entrepreneurs who would rather have a tooth pulled than keep up with their finances :^) On the upside, you will find a routine that compliments how you work as your business continues to grow. I recommend using a computer software or an online bookkeeping program to automate as much of the financial management as you can. Once you do this it will becomes less of a chore. Good luck!

  3. I think you have covered a very important aspect here!
    While people are all taken up by the big idea, they lose sight of the hground essentials, making their preperations incomplete.

    Thanks for sharing!

    • Harsha, thanks for stopping by!

      That is the message that I want to drive home — “Already be ready already.” Not only that, understand the financial side of business to be able to explain answers to questions that lenders may ask.

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