The ultimate goal when seeking funding is to create both a short and long-term funding strategy specifically catered to your business. Your business’s approach to funding will have variables that differ from other businesses. However, the basic principles of building a solid business credit profile can be the same.

Variables considered in the funding process often include:

• Business offerings or services
• Length of time in business
• Business owner credit profile
• Amount of needed funding
• Business industry

Every business is different in what they do, what they offer, and who the owners are. Length of time in business, type of business/industry, and the amount of funding you need will affect how we decide to proceed in your search to obtain funding.

Because self-awareness is key in the game of obtaining funding, a great starting point is to identify your current credit score and your available actions to build a more robust credit profile. For instance, if an owner has an 820 credit score, the approach will be vastly different than the approach for someone with a 600 credit score. A lower score will limit but not prevent you from a long-term strategy; it will only take a while longer. Some business owners will have to begin their strategy by simply cleaning up their personal credit profile.

Your specific funding strategy will also differ according to the revenue your business is bringing to the table. So, for example, if you’re beginning your funding strategy with $0 revenue, we can recommend different approaches than we would for a business with higher revenues for a starting point.

The two things to expect in every available funding approach are the necessity of time and patience.

You must have the patience to cultivate the contributing factors that create good creditworthiness. Your credit profile has to prove to lenders that your business is trustworthy. A good credit score will get you good short-term results, but all businesses have to work on their long-term plan. Always be taking small steps toward obtaining certain types of funding like stacking, loans, building credit lines, favorable relationships with banks, or small business loans.

People often wait to obtain a loan because they don’t want to pay interest on the loan when they’re not using the money, especially if it’s not a revolving line of credit. You must switch to the mindset of being a business owner that is constantly taking steps to have funding available when you need it most. The total amount can even sit in your checking account to bolster your average balances in the business checking account, which banks look at to qualify you for loans. As an added bonus, it builds your business credit profile.

Loans are a long-term strategy for which you need patience. Building favorable relationships with banks will also help you get revolving lines of credit. You’ll begin with a lower credit amount and eventually build your relationship to increase your credit limit. Leaving money in your business account will help you accelerate the process by fluffing up your average balance.

It’s important to fully consider all the factors that work for and against you to decide your best starting point, types of funding to pursue, and the benchmarks you’ll be working towards during the process.

When and how do I start?

Don’t wait to seek funding until it’s an urgent situation. In the scramble for funding, you may not realize which bank is transparent or fair if you haven’t laid the foundation for solid bank relationships, a strong credit profile, or selected a bank through interviews.

Use the bank’s guidelines to make an informed decision and choose a bank that will offer the most avenues for strategy and options. Interview a minimum of five banks, start with smaller banks, and compare the answers to more prominent national banks. This approach will lay the proper groundwork for your business to obtain funding.

Bankers do not want to answer your questions. They want the power to offer you credit instead of you making an informed decision based on their parameters that often go unspoken. You’re doing what they want you to do when you don’t ask questions. Speak up! This should be a mutually beneficial, long-term relationship. The one thing you’ll never get back is the time spent invested in finding funding or building the foundation if you bank with the wrong bank.

If you haven’t interviewed several banking institutions, how could you decide if it’s worth leaving money in the account? We recommend that you don’t waste time banking at a bank that will never qualify you for a line of credit. For this reason, it’s imperative to ask the right questions before you establish a banking relationship.

Examples of Good Questions to Ask

1. Does your bank offer a line of credit or loan that can be used to ______? (Fill in the blank with your intended use of the money.)
2. Do you base your decision on what we use the money for, or is it primarily based on average balances in our bank account and tax returns?
3. What will our average balances likely need to be to qualify?
4. Will you use our projected income for qualification or only base it on average business bank account balances?
5. Is there a minimum time requirement for our account to be open to qualify?

Asking these questions reveals a bank’s practices and how a favorable banking relationship would develop with this particular institution. How would you do anything about it if you don’t ask what you don’t know? How can you make decisions for your business without a solid grasp of expectations from the bank?

Even if you think you’ll never need more funding than what’s available, the more success you accrue, the more likely it is you’ll need funding to maintain that trajectory, especially if you have employees. You’re insuring your business against possible calamity. Like medical insurance, you lay the groundwork to have support when you need it most. You don’t know when you’ll need it, but you won’t be painted into an unfavorable situation of desperation when the time comes.

Adam’s personal story

Our credit guru Adam got into banking and bank ratings when he was in real estate investing in flipping houses – in a short period, he had accrued a $30k balance in his account, and the bank contacted him to offer a $300k line of credit. The prospect was exciting, but when he went in to sign documents, he asked why he qualified for the loan. They explained he maintained $30k over 12 months. So he pressed more to uncover these unspoken qualifying factors. First, he was glad he asked the questions, then he got mad – if he had known about these parameters, he could have borrowed other money to fix a property instead of using his profit, so the line of credit offered would have been exponentially more.

To have the strategies to play big, you must ask the questions that reap the highest reward. Knowledge will change the way you play the game. It will sway your decisions and help you level the playing field. You don’t have to be left in the dark, especially regarding your business, passion, and livelihood.

Ask the questions to make bankers truly reveal how they do business. We’ll help map out the value of each available funding option. No question is too small. At Propel, we are always available to take calls and assist with your funding strategy questions.

This game is yours for the taking.