How Loans Help Small Businesses Grow
Whether you are launching your small business, or trying to expand your existing business, a small business loan may be an option to consider. Ponce Bank is a community bank. This means we support the small businesses in our community. A small business loan from Ponce Bank, if appropriate, can be used to help your business grow.
Covering Start-Up Costs
Before you open your business, you’ll need to spend money to get your business up and running. These costs are known as start-up costs. If you are just getting started, your business probably doesn’t have clients, orders, or sales yet. One way that new businesses help pay these initial start-up costs is by obtaining a small business loan.
What are some common start-up costs? These include:
Office or Retail Space
Utilities (Electricity, Internet, Phone, and Other Costs)
Licenses and Permits
Lawyer or Accountant Fees
Website Costs (Including Web Security, Web Advertising, and More)
Ponce Bank is a community bank that understands the unique challenges that start-ups face throughout New York City and Northeastern New Jersey. We offer different small business loan options to meet these diverse needs. One of the loan options that may be available to you is a Small Business Administration loan (or SBA loan). SBA loans are government-backed loans that can provide start-up funding, help you with cash flow issues, provide you with the money you need to expand your business, or even fund business real estate purchases. Potential benefits of taking out an SBA loan for your small business is the competitive interest rates, low fees, and flexible repayment options (many SBA loans have longer repayment periods than other types of business loans). Eligible borrowers can get anywhere from $500 to $5.5 million through the SBA program, but how much you’ll be able to receive will depend on your business needs. SBA loans have strict guidelines. If you’re thinking about taking out an SBA loan at Ponce Bank, we can help you understand what small business loan options might be available to you.
Helping Minorities and Women
Many start-ups or people with good ideas go to venture capitalists for start-up funds. Venture capital, in short, is a private investor, investment bank, or other investment institution or organization that gives money to a promising new company or founder, usually in exchange for some percentage of ownership in the company to help the company pay its start-up costs. Sometimes venture capitalists will loan money to new business owners to help them pay their start-up costs.
According to Forbes, women-led start-ups received only 2.3% of total venture capital funding in 2020. Venture capitalists may fund companies led by people who look like them or who share similar backgrounds. There aren’t many venture capitalists based in our neighborhoods. Ponce Bank is a community bank that believes in bridging these gaps. We care about helping minority-owned and women-owned businesses and founders with great new ideas. We believe the immigrant communities in and around NYC can be incubators of innovation, new ideas, and exciting new businesses.
Loans Lead to Business Ownership
One of the downsides to seeking venture capital is that most investors will own a stake in your company. While you’ll need to pay back a small business loan, a big benefit is that you won’t have to share profits and control of the business with a venture capitalist. Even if you aren’t thinking of seeking out venture capital, there are other unique situations where a small business owner may consider a loan. For example, if you are getting divorced and don’t want to co-own the business with your ex-husband or ex-wife, a small business loan could help you secure the funding to “buy out” your former partner’s stake in the business. A small business loan can also be an alternative to seeking a business partner, if you can’t afford to start your business on your own, but don’t want to share the decision-making with someone else.
Funding for Growth
Want to open a second location or launch a new product? A small business loan might be able to help you cover the costs of renting a new space, buying furniture and equipment, paying salaries for new staff, and help you increase your inventory to support a new location. If your current location already has a track record of success, at Ponce Bank we are rooting for your growth and continued success. Reach out to our community bankers today to discuss your plans and see whether a small business loan is right for you.
Handling Seasonal Change
Some businesses see big seasonal changes in when they make their money. A local flower shop might make more money during graduation season or in the summer when people have more weddings than in the dead of winter. A gift shop might see big business in December around Christmas time, and then see sales drop early in the year. Eligible businesses with seasonal variation can borrow money to keep the cash flowing, meaning the bills are paid, employees still get their paychecks, and the business can purchase inventory to prepare for the next busy season.
Cash Flow Issues
A business loan can help you address cash flow issues. Cash flow refers to money moving in and out of your business on a daily, weekly, monthly, or quarterly basis. When a customer pays for a service or item, cash flows into your business. When you need to pay rent or salaries, cash flows out. Cash flow is different from profit. Profit is the amount of money left over when all business operating expenses are subtracted from the money flowing into the business. A business could theoretically be profitable but have cash flow crunches. Take for example, a wedding planner who does most of her business in the spring and summer, but still needs to keep the lights on, pay salaries, and do her marketing in the winter and autumn months. When she looks at her books over the year, she may make a profit, but could find herself temporarily with not enough cash flow in the winter months to cover salaries, rent, and other expenses. A business loan can help bridge this gap if cash flow issues become critical.
Build Credit for Your Business
Taking out a small business loan to get you through seasonal change, to help you finance new equipment, or expand your staff to handle more demand or grow can in some cases help build strong credit for your business. Having a track record of taking out small business loans and paying them back may come in handy if you want to make even bigger moves for your business down the line, like getting a mortgage for commercial real estate.
There are many potential benefits to choosing to take out a business loan. A business loan can be used to help your business get through a slow season, help you retain ownership of your business (rather than seeking out investors or business partners), keep you in business if you are having temporary cash flow issues, and help you buy the equipment, retail or office space, and talent you need to grow or launch.
Yet, a small business loan may not be right for every business. A small business loan must be repaid, meaning you’ll need to have a solid business plan and clear documentation to support your financial position showing that your business will be able to repay the loan. If you put your business or personal assets as collateral, you could lose these assets if you cannot repay the loan. At Ponce Bank we want you to succeed, which is why we take the time to help you find the right type of small business loan for your needs and take the time to review your business plan and financial situation to help you understand whether taking out a small business loan is right for you. If you want to learn more about starting your own business, check out Ponce Bank’s “Being Ready” series, where we offer courses on a range of topics crucial to startups and new entrepreneurs, including financing for small business and small business loans.
Want to explore your small business loan options? Visit Ponce Bank today, and chat with a business loan specialist today.
Please note that this blog is provided for general informational purposes only. Some of the information may not be applicable or appropriate for all businesses, and the information is subject to change. You should consult with financial and business advisors to determine what is best for your business’ needs. All loans are subject to credit approval, and SBA loans are subject to SBA requirements and guidelines.