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How To Approach Your Business Finances With Confidence

By Denise Franta

It shouldn’t come as a surprise to most entrepreneurs that starting a business is a challenging endeavor. In fact, a recent study from World Bank, Facebook and the Organization for Economic Cooperation and Development (https://www.inc.com/leigh-buchanan/why-its-so-hard-to-start-a-business-in-the-us.html) found that the U.S. ranked 51 out of 190 countries when it comes to the ease of starting a business, a ranking that weighs factors such as procedures, time and one of the biggest hurdles: costs.

Over the course of my career—from working as a branch manager at a bank to my current role as director of Access to Capital at the Women’s Business Development Center (WBDC)—I’ve witnessed firsthand how difficult it can be for individuals to navigate the process of requesting the right amount of capital for their small business.

For women and minority business owners, in particular, a variety of factors make the process of applying for loans even more formidable. According to a report (https://www.forbes.com/sites/forbesfinancecouncil/2018/01/22/why-minorities-have-so-much-trouble-accessing-small-business-loans/#3df3241055c4) from the U.S. Department of Commerce’s Minority Business Development Agency, minority-owned businesses are much less likely to be approved for small business loans than non-minorityowned firms. And, even if they do get approved, minorityowned firms are more likely to receive lower amounts and higher interest rates. Ultimately, these discrepancies often make minority business owners less likely to apply for small business loans, usually out of a fear of rejection.

One common thread I see as I interact with business owners is that oftentimes they simply lack the confidence to advocate for themselves when it comes to finances. They may be scared because they don’t fully understand it, or because they believe they won’t receive the funding.

While applying for loans may seem overwhelming, it’s not as painful as people think. Being prepared and taking a few simple steps to understand the process can make all the difference for your business.

First, it’s crucial to take the time to obtain a working understanding of how money flows through a business, as well as the correct channels to utilize in order to accomplish your goals. There are many resources available to help you understand your business’ cash flow so you can make a more educated decision on your funding needs. Organizations like the WBDC offer programs throughout the year that can help you build the confidence you need to make your financial decisions.

It’s also important to thoroughly research relevant financing options in terms of what you need to accomplish for your small business, while understanding that loans must be paid back in full in the future. There are multiple types of small business loans available, with options varying, depending on your business needs, the length of the loan and the specific terms of the loan. Regardless of the type of financing option you choose, knowing your options is an important step towards helping your business grow.

Next, dive into the specific requirements you need to complete your loan and make sure you have all of your paperwork in order. Understanding the requirements and completing each step methodically will help you feel confident that you know what you’re doing and can make the process as painless as possible.

Now, it’s time to figure out how much money you need—which can be a difficult science. Too often, I see small business owners ask for too much money because they don’t fully understand how much they need. I encourage individuals, especially those very early on in their business career, not to bite off more than they can chew when it comes to capital. It’s important to keep yourself flexible so you can respond to any unknowns that could occur in the process of paying back your loan.

I also urge my clients to be conscientious about how their business will generate money from the beginning. Securing a loan is a tremendous financial responsibility, and it’s important to make sure that your business isn’t saddled with debt from the very beginning, which can hurt your potential to earn money in the future.

Ultimately, a detailed understanding of your business’ financial needs can help reduce short-term challenges while giving yourself a better chance at long-term success. Let 2019 be the year that you stop second-guessing yourself and start approaching your finances with the confidence you need to succeed.

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