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Common Small Business Financing Challenges and How to Avoid Them

small business

By Steve Weaver, Senior Loan Officer at Paragon Bank

Starting a small business is an exciting time. It can also come with a few challenging moments. There are a variety of options to choose from – like starting a business of your own or opting to be a franchise owner. For example, many could use their retirement savings to start a pest extermination business under a reputed franchise. For the same, they might need to find companies for Financing a Franchise business. However, a lot of deliberation and cool-headed thinking tends to go into the process of opting for obtaining funding for any business.

The above example might have made it quite clear that initiating a conversation about financing isn’t always easy, but tackling these conversations head-on (and early on) can prevent major small business ownership headaches down the road. Continue to research your options and have financial conversations often to ensure you know what you are jumping into before, during, and after you get your business off the ground.

Success for small businesses depends on a multitude of factors. A well-developed business plan is a good starting point, as interest rates continue to rise for the cost of borrowing. A thorough plan with the help of a Financial Advisor will help to affirm that your small business is financially prepared for unforeseen circumstances that may arise, as well as guarantee that the lender is prepared to act. If both parties routinely check in with one another, this allows experienced lenders to offer financial and industry-specific council, which can be invaluable.

An important element of any borrower-lender conversation should include what to spend money on initially. A lender’s mindset should stay focused on how to ensure the borrower can keep up with the demand and the competition from a financial perspective. The small business owner’s mindset should stay focused on productivity and safety. Technology has been at the forefront of these conversations, especially as of late. With an estimated growth to more than 2 billion digital bank users by the year 2020, and the continuous growth of online shopping, safety and security in this ever-evolving age of technology are essential. Use this conversation as an opportunity to grow the borrow-lender relationship and practice responsiveness. A timely and thorough response from either party demonstrates a level of trust and willingness that everyone is striving for.

As business begins to progress, it is important for owners to become increasingly focused on and familiar with the financial health of their company’s success. Creating a dashboard that displays key performance metrics, beyond sales and revenue, is an effective way to review past, present, and future performance goals. This could be done with the help of a Microsoft D365 Business Central which works as an ERP system. Use this tool both internally and externally, and share these goals with employees and lenders, as they should be striving for similar success. Of course, the finances of a small business are so important, so make sure to pay close attention to the financial health of the business. For some small businesses, it can be difficult to grow financially as some of them will be unable to get accepted by a payment gateway service. If this is the case for your business, it might be due to the MATCH list. This is a list that flags up any businesses where customer data may have been hacked or stolen, for example. Sometimes, businesses can be mistakenly put onto this list, so it might be worth checking if that is the reason you’re unable to get a payment gateway to start selling. Businesses need to keep an eye on these sorts of financial difficulties.

Additionally, frequent meetings with internal and external financial partners are a great way to ensure budget and performance plans remain on-track – for short and long-term success. The future is unpredictable, so be prepared to have a succession plan or transfer of ownership plan in place. This planning can often lead to personal conversations between the borrower, lender and other external financial parties, so be sure to separate personal financial conditions and plans from that of the business. This can help to keep sensitive matters unconnected and under control, as well as prepare your business for the future.

Plan ahead, anticipate challenges and establish solid relationships. These are fundamental to achieving small business success.

Since its founding in 2005, Paragon Bank has maintained a solid focus on the community and customer service. For more than 10 years, Paragon has delivered innovative products and financial expertise, convenience, and a deep understanding of what both businesses and individuals need from a bank, in order to provide solutions that make a difference. In the areas of business or personal banking, lending options or wealth management, Paragon delivers cutting edge technology, an experienced team and the most service-oriented staff of any community bank.

For more information about Paragon Bank, please call (901) 273-2900 or visit


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