Getting access to financing can be tricky for small businesses, but the ones who build a good credit score and establish a relationship with a banker will have an advantage.
Those were just two of the tips shared at “Financing Your Small Business,” a workshop that’s regularly held at the offices of the Kansas City, Mo., Community Development Entity (KCMO CDE). Organizers want to help small businesses get the capital they need to thrive.
“We’re really trying to provide a platform for investing,” said Ruben Alonso III, director of the nonprofit KCMO CDE, which works with small business support groups and lenders to promote local entrepreneurial activity.
The session offered advice from lenders along with information about financing programs aimed at small business owners—including the KCMO CDE’s Façade Improvement Loan Program, which makes available five-year loans of up to $50,000 at a fixed 5 percent interest rate for businesses located in highly distressed low-income communities.
Financial coach Channa Navarro of the Women’s Business Center focused on the importance of entrepreneurs building a good credit score in order to obtain a loan.
“A credit report is your financial resume …” Navarro said. “You need to be moving in the right direction.” The higher your credit score, the lower your interest on a loan, she said, so “it is literally saving you money to have a good credit score.”
Loan officer Lisa Zimmerman spoke on behalf of St. Louis-based Justine Petersen, a community development financial institution that administers the Kansas City Microloan program. Since the program’s inception in 2011, Zimmerman said, it has granted $2.5 million in loan funds to Kansas Citians, with an average loan of just under $9,000.
Zimmerman’s advice to budding entrepreneurs: Don’t quit your “W-2 job” and expect to impress a lender with your commitment to working full-time on implementing your business plan. A new business needs cash flow, but that may not come from the business itself for one to five years, Zimmerman said. Keep working for an employer as long as necessary, she said, because “you need to keep earning income, until your business has enough money to pay you.”
Community banker Julie Nelson Meers of Missouri Bank talked about the importance of having collateral to get a bank loan, and how bankers are more interested in a consistent track record than they are in a brand new approach.
“If you’ve been producing X’s and now you’re going to produce Y’s, that can be typically hard to get a loan for,” Nelson Meers said.
Bankers like to give loans to entrepreneurs who are willing to put their own skin in the game, she said. So be ready to put up all that you may own—including your home—to make a loan happen.
“That’s part of entrepreneurship,” Nelson Meers said. “You have to be willing to put everything on the line.”
And be sure to find a bank that you can love and that can love you back, she said. Having a trusting relationship with your banker will only improve your chances of getting a business loan, especially when it’s a close call for the bank.
“Start sowing those seeds for a relationship,” Nelson Meers said. “It’s the relationship that’s the tie breaker.”
The next “Financing Your Small Business” session will be at 4 p.m. on Dec. 17 at the KCMO CDE, 1900 Vine. To register, email info@kcmocde.org or call (816) 216-1851, ext. 4.
For more information about the KCMO CDE, visit kcmocde.org.
