When your business needs capital

bank vs. personal financing

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It’s kind of like a secret club.  Whether you are plotting your start up while working a full-time job, are currently a solo entrepreneur, or if you’ve owned a business for 50 years – there are commonalities.  You are a master decision maker and visionary, work a lot of hours and the oddest things will keep you up at night.

Owning and running your own business is amazing and rewarding, but one thing it is not is …EASY.  I have yet to meet an entrepreneur that says running their own business is a piece of cake. You are married to your company. As with most marriages one of the biggest stressors is money.  All business owners want positive cash flow, but every business has ups and downs.  It’s not all roses!

According to Forbes one of the top reasons that businesses fail is the inability to have a business model with proven revenue streams. Without revenue streams (read cash flow) there is a big business problem. Sinking your personal money into the business may be a quick fix but it is not a long-term solution.

The SBA (Small Business Association) claims about 1/3 of new businesses close within the first 2 years of business. And 96% of new businesses will close will close within the first 10 years. Why? For most companies, they go out of business because they don’t manage their cash and can’t pay their bills. Sure, some close up shop because of major life changes, like relocating, family emergencies, health, etc., but the #1 reason is cash flow.

What about bank financing?

Any bank will want to see a solid business plan and the ability to repay debt before they will consider lending you money. Bank financing allows a business to scale, buy property, or be a buffer for cash flow deficiencies.  Today’s money is inexpensive to borrow with interest rates hovering at all time lows.  Using someone else’s money just makes good business sense for the right company.

The best solution to get away from self-funding your business: Line of Credit.

Most businesses should have a line of credit.  You only pay interest on the funds used and it’s the perfect solution to ensure your business has the cash it needs.  The application process is fairly simple and often the line of credit can be granted unsecured, so no collateral is needed but it’s guaranteed by the company and/or owner.    The amount of the credit given depends on the size of the company and the need.

It’s always wise to chat with your accountant to determine what is the best solution for your unique situation.  If you would like more information about lending solutions, don’t hesitate to give me a call!







Bob E. Teittinen
Commercial Lender, Senior Vice President

Author: Robert Teittinen

Bob Teittinen joined Litchfield Bancorp in 2011 as a senior vice president and chief lending officer. Bob is a 27 year veteran of banking and is known locally for his expertise in helping mid-sized businesses with commercial lending. Bob is responsible for growing the bank’s commercial loan portfolio and overseeing the bank’s commercial, residential and consumer loan portfolios. Prior to joining the bank, Bob was senior vice president at Union Savings Bank and throughout his career has worked at regional banks; Banknorth, Webster and Shawmut. He also spent 11 years in the private business sector, which he considers an invaluable asset when it comes to commercial lending. A resident of Litchfield, Bob plays an active role in the community. This includes his induction into the Chamber of Commerce of NW CT’s Hall of Fame in 2008. He currently serves on a number of boards including the Chamber of Commerce of NW CT Foundation, Naugatuck Valley Development Corporation and Easter Seals of Greater Waterbury.

One thought on “When your business needs capital”

  1. I found it interesting that most businesses have a line of credit and that no collateral is needed. My friend wants to start up a small business, but isn’t sure if he should take out a loan or just save up money until he has enough. I think this article will help him decide which process he wants to choose.

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