If we’ve said it once, we’ve said it a million times: WE HAVE THE SMARTEST TEAMMATES!!
Connie joined the Simplicity Team in 2021 to serve our commercial and agricultural members in and around the Stevens Point area and she is one smart cookie so we decided to pick her brain for some great tips to share with our business-minded friends.
Don’t mix personal expenses with business expenses – open a separate business checking account to run all business transactions thru, and do not use personal credit cards to finance your business if at all possible. Keeping your business expenses separate will make record keeping simpler and tax time easier. Simplicity Credit Union offers a Business Credit Card with the application right on our website for convenience.
Do not be afraid of borrowing money – while it is wonderful to be able to finance your business with personal savings, it may not be ideal. Sufficient reserves/savings should be maintained to handle seasonal fluctuations, downturns in the market, and unexpected expenses. Simplicity offers Business Lines of Credit to help with cash flow needs, as well as Business Term Loans to help with growth and expansion.
If you want to assess your business creditworthiness, focus on the 5 Cs – Character, Capacity, Capital, Conditions & Collateral. Lenders look at these 5 categories when decisioning business loan requests. Character is your trustworthiness, credibility, and sincerity in all of your interactions with the bank. Capacity is your ability to repay the loan. Banks look not only at the business financials, but your personal cash flow and credit as well. Capital is the amount of money that you are investing personally. Banks are more willing to lend to someone who has invested some of their own money into growing the company and/or are able to make some sort of down payment. Conditions speak to the economic and industry and environmental conditions that may be affecting the company at that point in time. Lastly, collateral is the asset(s) that will secure the loan. n most instances this is whatever you will be purchasing with the loan funds.
When you are ready to borrow money, it helps to be prepared – your lender will ask for 2-3 years of the most recent business and personal tax returns, a personal financial statement to be completed, and information on what you will be using the funds for. If your business is new (hasn’t been in business for a full tax year), a business plan that describes the nature of the business along with a year-to-date and/or projected yearly income & expenses and a balance sheet would be required. If funds will be used to purchase a vehicle or piece of equipment, then details of that item must be provided such as year, make & model, VIN or serial number, and who you are purchasing it from. Simplicity Credit Union has a Business Loan Application on our website that includes a Credit Application Information Checklist for reference. The Personal Financial Statement can also be found on the website.