Small Business Lending: Do You have the Capital You Need?

So, you’ve got your small business up and running. You have a solid customer base, a consistent quality product, and you even managed to squeeze a little personal time into your schedule once in awhile. Well, congratulations, my friend, you are on your way.

Now that you’ve got the basics under control it’s time to think about taking your business to the next level. This might mean new equipment, a bigger office space, or gasp! - hiring employees - but something’s gotta give if you are going to grow. Oftentimes growth requires access to capital, and if you poured everything into your business to get things up and running, you don’t have the funds to invest in the future.

There are a few ways to access capital, and most of them require borrowing. The key questions are “From where?” and “What will it cost me?” Let’s look at a few scenarios:

Borrowing from Friends or Family:
Borrowing from someone you know can be tempting. There isn’t a bunch of paperwork, the terms might be pretty flexible, and your lender is someone who believes in you and your business. But, oftentimes, borrowing from loved ones can lead to disagreements and hurt feelings. Those who lend feel like they now have a say in how you operate your business - understandably so as it is partially their money on the line. If things do go as planned, family gatherings can be awkward for years to come. Even if the money is a gift, with no expectation of repayment, strings might be attached, and borrowers should proceed cautiously, if at all.

Putting it on a credit card:
If you don’t have a outlay of capital today to pay that bill, putting large purchases onto a credit card is a dangerous game. While it is nice to have access to capital without having to present a business plan or apply for a loan, you will pay for it in the interest rate on this money. This is a hole that can be extremely difficult to get out of. Keep your business card for office supplies and business trips, and leave it at home if you’re financing 5 figure piece of equipment.

Borrowing from a bank:
Banks are an obvious choice, they have large reserves of money, and the tools that can help small businesses get organized. They are also for-profit institutions. This means, that while this is good for the owners of the bank, it may mean rules for borrowing are more stringent.

Credit Unions:
Borrowing from a credit union will give small businesses many of the same features they would get from a bank. Additionally, credit unions are non-profit entities that are member owned. Typically, this means that the institution is a bit more flexible in its loaning guidelines and can continue to have very competitive rates. Credit Unions also have a vested interest in the community as this is there member base. They understand the communities where they are located and still treat banking as a long-term relationship rather than a transaction.

Here at First Basin we have fantastic rates on small business loans, and the financial experts that can help you get your business to the next level. If you are considering growing your small business, come by any of our seven locations in the Permian Basin and find out about all the ways we can help your small business succeed.