CFO on Speed Dial

  • Home
  • Services
    • CFO Prime
    • Financial Success Lab
  • Blog
  • Portfolio
  • About
  • Contact
  • RESOURCES
  • Home
  • Services
    • CFO Prime
    • Financial Success Lab
  • Blog
  • Portfolio
  • About
  • Contact
  • RESOURCES

10 Ways to Fund Your Business Growth

10/16/2017

0 Comments

 
How to get the cash you need to grow your business
Picture
The fact is, every business needs cash to expand. And, if you’re in business, you want to grow.

However, there are only 3 types of capital that can fund your growth, and a
huge variety of ways to get that cash (I’m going to cover 10 of them). But first...

THE THREE TYPES OF CAPITAL
​
  1. Cash—profits from the business (or your personal piggy bank).
  2. Loans—money you’re obligated to repay on a regular basis, regardless of how well the business is faring.
  3. Equity Investments—also known as Investors. Investors benefit from both profits and the overall growth of a company, but they’re only paid back if and when the investor can sell their slice of the pie (which usually happens when a new, larger investor purchases the company).

To be fair, people get creative with money, and there are some exceptions to the rules I’ve laid out (like crowdfunding campaigns that are treated by the IRS as income but which entrepreneurs treat as investments), but in the end, all capital can be placed in one of these three categories.

The key, however, to your successful growth is knowing
where to get the money you need to grow, and matching the source of funds to your business’ needs and the stage of growth you’re in.

10 SOURCES TO GET THE MONEY YOUR BUSINESS NEEDS TO GROW

  1. Personal Savings: Preparing to launch a business? Start stashing away your cash now so you can support yourself while the business gains momentum.

  2. Business Profits: If your business is up and running, set aside a percentage of profits in a separate growth account—that you don’t touch—in order to accumulate the money you’ll need for expansion. The more cash you have in the bank, the easier it’ll be to grow without taking on debt or investors.

  3. Family and Friends: Even if your friends and family don’t have a lot to give individually, small amounts accumulated can make a huge difference. Plus, the act of asking, defending your ideas, and answering questions from Aunt Marge and Cousin Jo will be an invaluable learning opportunity for you as an entrepreneur.  In the beginning you can structure these as long-term loans to the company and create a simple letter of agreement.

    Start with your immediate circle, and also ask them to make introduction to anyone who might be helpful. That’s how you build a deeper network of people who can support your venture.

  4. Credit Cards: When you open your first business bank account, ask for a credit card. Be sure you use it and make regular payments to build your company’s credit rating so when you need more capital, you qualify to receive it. Build your company credit by registering with Dun & Bradstreet and supply the D&B number to your main vendors and suppliers (see below).

  5. Vendors & Suppliers: Identify your key suppliers early on. Order and pay as consistently as possible. When you’re ready to grow, ask for 30 day terms (or whatever terms match your company’s cash cycle). These terms effectively utilize your suppliers to help finance your growth. It’s good for them too, because as you grow, their sales also grow.  

  6. Institutional Lenders: Banks & Small Business Lenders. These are for vetted businesses only—don’t expect a bank loan the day you hang your shingle. Institutional lenders will be most interest in making loans to your company after you’ve been in business for a few years and have a solid client base or steady revenue. Some banks are more likely to lend to small businesses than others, which is something you might want to keep in mind when you open your company bank account. (Read more about 3 factors to consider when choosing a business bank.) Non-profits and organizations that support entrepreneurship can often help businesses apply for an SBA backed loan or with finding a local bank that’s an active SBA lender. (In New York City Accion and BOCnet, are active small business lenders while the city’s network of Business Solutions Centers will help you apply for credit.)

  7. Online Lenders: Be very careful with these lenders. Many of them charge extremely high interest rates, but some are more creative and friendly. Make sure you fully understand the loan terms and repayment requirements. These are best used when you have a short term cash need (ie: can repay within a few months) or strong and stable receivables. Example lenders are: Fundbox, Square Capital and Fundera.   

  8. Private Investors: Angel Investors, Seed/Pre-seed Investors and Venture Capitalists fall into this category. There are two ways to find them: personal connections and investor groups and platforms, like Investors Circle and Circle-up. If you’re thinking about seeking private investors, talk with other owners and learn from their experiences and attend pitch events or accelerator programs to learn about how to present your company and the opportunity. Again, make sure you have your finances in order. Plus, be prepared to hire outside experts to help shape the best possible terms for you.

  9. Crowdfunding: Crowdfunding has become a popular way to finance all sorts of endeavors. There are three types of crowdfunding.

    -Reward based (see Kickstarter, Indiegogo or -- for food and beverage companies only -- PieShell)
    -Loans (vist Kiva)
    -Equity (check-out Crowdfunder, SeedInvest and a new equity platform on Indiegogo)

    Crowdfunding is an excellent way to raise money and enlist your loyal followers to get more exposure. Caution: make sure your crowdfunding plan is designed to succeed with a realistic achievable goal based on your company’s strengths. To really hit it big a crowdfunding campaign takes a huge amount of planning, outreach and PR. Unless you already have thousands of followers, don’t expect it to be free. Include the campaign costs as well as the rewards themselves and the platform fees in your planning budget.

  10. Government Grants: Grants are sometimes available for business projects, especially if the project will create new jobs in targeted communities. To get started, look for workshops, announcements or direct help from a state, county or local economic development agency, or industrial development agency. Virtually every county, region or city has one dedicated to helping small businesses expand. The types of funding available varies depending on the type of business you are in -- but could cover things like new equipment, costs related to hiring and training new staff, even research and development of new products that meet a specific need (especially related to energy or the environment). ​

Are you exhausted and confused? I hope not!!  But while I was writing this post I realized that each source deserves a post (or a book) of its own!  So consider this blog post the introduction and look for a deep dive on how to access different sources of capital each month.  And if you just can’t wait then get started right away with a free 30 minute consult with me!

0 Comments

Banking 365: 3 Overlooked Factors to Consider When Choosing a Business Bank

10/12/2017

4 Comments

 
Money and Banking    
Banking is a funny thing. With every deposit we are actually putting our money in someone else’s hands and trusting that it will be there when we want or need it. We’re also giving that institution the power and ability to use our money while it is held on deposit.
Picture

What do you know about what your bank is doing with your money?

Business owners often choose to open bank accounts at places that are physically close to us (convenient) or where we have banked previously (known). After all, if you’re going to trust your hard earned money to someone it should be an organization or institution that is secure and dependable. But in the age of electronic banking, proximity is not always the best indicator of convenience. And size is certainly not a guarantee of safety or security.  So, when I think about choosing a bank, I’m primarily concerned with three additional factors:
  1. Cost/fee structure
  2. Online access and functionality
  3. Alignment with my social values and personal priorities

For many people the convenience and security equation leads them to choose one of the country’s biggest banks: after all they are are practically everywhere (convenient) and dominate that marketing landscape (well known; I mean, doesn’t everyone bank there?)

But big banks are not necessarily trustworthy (cough, cough, Wells Fargo).
Nor are they the most in tune with the needs of small business owners.

There are literally hundreds of banking options available to you depending on where you live and assuming you have reliable internet access for online banking. There is even a website devoted to helping you find a bank that matches your needs and interests. It’s called Find A Better Bank. The website is tailored to consumer/personal banking but you can also use it to find a short list of banks to research further for your business banking needs.  But how do you know what you’re looking for?

The banks I recommend fall into three major categories:  Independent Community Banks, Social Impact Banks and Community Development Banks or Credit Unions.  To understand all the options available to you, here’s an overview of each type of bank to consider. Each type of bank also has an industry website you can use to search for banks that serve your needs.

1.  Independent Community and Regional Banks
About 80% of small business loans are originated by regional banks. This is because regional banks are still in the business of building relationships. They are more likely to actually get to know you and your banking needs; and may possibly be more flexible about things like monthly fees and how they evaluate your loan application.  Where to find them?  Look on the main street of your town or local shopping area.  Or check out the members of the Independent Community Bank Association

2.  Social Impact Banks
Some banks include a social impact mission in their business structure and core operations. To be sure this is a solid commitment (not just “greenwashing”) you can rely on institutions that are certified B Corporations. B Corp members meet the highest standards of verified, overall social and environmental performance, public transparency, and legal accountability. To find a bank that meets this standard,  Go to the B Corp website, under Find A B Corp and put the word Bank into the search bar. You’ll get a list of banks that are B Corp members. Seven of the current listings are based in the US (two of those are based in NYC.)  All will open online accounts that give you full access, even if you’re not based in the same city or state. If you need international banking check out The Global Alliance for Banking on Values, an independent network of banks using finance to deliver sustainable economic, social and environmental development. The Global Alliance for Banking on values posts member information on a global map (most of these banks active in the United States are also B Corps.)

3. Community Development Credit Unions or Banks
These are specific banks and credit unions that are dedicated to providing financial services to underserved and under-banked communities. If you are lucky enough to have one in your town or neighborhood you’ll find they are a great way to know your money will be used to support your neighbors. Plus, because they are small and geographically focused, you’ll have the benefit of building strong personal relationships with your banker. To find opportunities in your town/city check these lists:
  • Community Development Bank Association: Community development banks are community banks committed to helping the underserved. All community development banks (and credit unions)  are certified as Community Development Financial Institutions by the U.S. Treasury, a designation which affirms their focus on mission.
  • National Federation of Community Development Credit Union:  Credit Unions are unique because they are structured as cooperatives that are owned by their members. Community Development Credit Unions generally serve specific geographic areas; individuals or business members are required to have some relationship to that area to be eligible to join. Credit Unions are also non-profit and tax exempt. Community Development Credit Unions have fair priced services as part of their core mission. If you’re looking for lower-cost banking services and care about financial opportunity for community members, a Community Development Credit Union could be the right match for your banking.


When you compare these options to the large commercial banks you can expect to find:
  • Lower fees
  • Lower minimum balance requirements
  • Fewer add-on services, and  
  • More flexible underwriting

The catch? Some of these banks could be considered somewhat higher risk than large commercial banks. However, with deposits insured by the FDIC or another regulator, risk is not a big factor for deposit accounts under $100,000.  If your bank balances are generally at or over $100,000 then you’ll want to add risk analysis to your consideration of banks along with price, convenience and social impact. Also consider keeping some of your funds (such as profit reserves) at a second institution.  

Maybe shopping for a new bank sounds like a lot of work -- but remember it’s YOUR money; and it’s up to you to be sure that your money is being used to build the world you want to live in (and leave to future generations).

Click here to download a spreadsheet you can use as a template for comparing different banks that serve your community -- It’s filled in with information from several New York City options which you may find helpful in your comparison shopping.

Sign Up for The Newsletter To Get Tools & Tips
4 Comments
    Picture

    Christine Rico

    Hi, I'm the founder of CFO on Speed Dial and an enthusiastic social entrepreneur.  I'm also into growing, preparing and eating good food.  As a Brooklynite, I love my urban life; but also take every opportunity to get out in nature -- to hike, bike or kayak in beautiful places.  It's how I restore my energy and find connections to the world. 

    Archives

    May 2018
    March 2018
    February 2018
    January 2018
    December 2017
    October 2017
    September 2017
    May 2017
    April 2017
    February 2017
    January 2017
    October 2016
    July 2016
    May 2016
    April 2016
    March 2016
    September 2015
    July 2015

    Categories

    All
    Female Entrepreneurs
    Finance

    RSS Feed

    Get my Financial Success Series, Starting with the 7 Numbers You Need To Know

Picture
Leave your email to receive the best tips and tools to grow your company. 

© 2015 CFO ON SPEED DIAL

Picture
Picture
Picture
Picture