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What Are The Most Common Reasons Small Businesses Seek Financing?

by Scott Clark

The most common reasons small businesses seek financing are for working capital, growth and expansion, and to purchase additional equipment. Businesses that have payment terms with their customers may need working capital to help fund gaps between payments. A growing business needs working capital to fund expansion. If a business owner pays rent, they may also seek financing to purchase real estate if they no longer want to rent their current location. Businesses seeking to increase revenue or reach new customers may need financing for additional locations. Replacing obsolete or broken equipment can also impact businesses and may require the need for financing.

Do Bankers Lend To Startup Companies? What Circumstances Would Make This Possible?
Yes, bankers utilize Small Business Administration (SBA) programs to lend to startup companies. The SBA guarantee reduces the risk for banks when working with startups. Direct industry experience and a good business plan will go a long way in helping a borrower obtain financing.
Projections within the business plan should be obtainable and within industry norms. The borrower will need to place cash equity into the startup project and usually ranges between 10% - 25% of the total project cost.

Answers provided by Scott Clark, Vice President, Commercial Lending at Simmons Bank. He can be reached at 314-854-4523 or scott.clark@ simmonsbank.com. The views and opinions expressed in this article are those of Scott Clark and are not endorsed by, and do not necessarily reflect the views of, Simmons Bank. Simmons Bank does not provide tax, accounting, or legal advice.

Submitted 193 days ago
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