By Maian McCauley, Chief Executive Officer, ASSETS

I have spent more than 14 years in banking, working with businesses at different stages and helping business owners understand their financing options. Today, as the CEO of ASSETS, a nonprofit and a community development financial institution (CDFI), I get to see that same process from a different perspective.

One thing I have learned is that getting a loan should not be the goal. The goal should be finding the right financing for your business, at the right time, for the right reason.

That sounds simple, but for a small business owner, figuring out what the “right” financing looks like can be challenging.

Start With What You Need

Before you start looking for a loan, ask yourself why you need the money.

Are you buying equipment? Purchasing inventory? Hiring an employee? Expanding? Managing a cash-flow gap? Investing in your business?

Start with the need, not the loan amount.

I have seen business owners focus on how much they can qualify for instead of how much they actually need. Just because a lender is willing to lend you a certain amount doesn’t mean you should take all of it.

Borrowing should have a purpose. You should be able to explain what you are going to do with the money and how that investment will help your business.

Know Your Numbers

This is where my experience as a business and commercial banker really comes into play.

Before taking on additional debt, you need to understand your cash flow. What is coming into the business? What is going out? What debt are you already paying? What will the new payment look like?

Revenue is important, but revenue isn’t the same thing as cash available to pay your bills.

I always encourage business owners to ask themselves: “If business slows down for a few months, can I still make this payment?”

Don’t just plan for your best month. Plan for the slower months too.

Be Prepared Before You Need the Money

One of the best things you can do is get your financial house in order before you need financing.

When you apply for a loan, you will likely need financial statements, tax returns, bank statements, information about existing debt, and a clear explanation of how you plan to use the funds.

But preparation is more than having documents ready.

You should understand your business well enough to explain where you are today, where you want to go, what you need to get there, and how you plan to repay the financing.

If you don’t know what your numbers are telling you, find someone who can help you understand them. There is no shame in asking for help.

Know That You Have Options

My years in traditional banking taught me the importance of responsible lending and understanding risk. My experience leading a CDFI has reinforced something else: not every entrepreneur or small business fits neatly into a traditional lending box.

That doesn’t mean every business should get a loan. It means having different types of lenders and resources available matters.

CDFIs like ASSETS are one part of that ecosystem. We work with entrepreneurs and small businesses to provide access to capital, financial guidance, and other resources that can help them move forward.

At ASSETS, we look at more than just a loan application. We want to understand the entrepreneur, the business, the opportunity, and the plan. Sometimes financing is the right next step. Sometimes an entrepreneur needs more preparation first. And sometimes another resource is a better fit.

Look at the Whole Picture

When you’re comparing financing options, don’t only look at the interest rate. Understand the monthly payment, repayment period, fees, requirements, and what taking on that debt will mean for your business.

Most importantly, make sure you understand what you are agreeing to.

The right financing can help a business purchase equipment, manage growth, create jobs, increase capacity, or take advantage of an opportunity. But financing is most effective when it is part of a larger plan.

Don’t start with, “How much money can I get?” Start with, “What does my business need, and what can my business realistically support?”

As a banker and now as a leader of a CDFI, I have seen what access to the right capital can mean for a small business. My advice is simple: know your numbers, understand your options, ask questions, and don’t be afraid to ask for help.

You don’t have to figure it all out alone.

Learn More

Read more about Lancaster’s small business community in our latest publication, Small Business Success— A resource magazine for small business owners and entrepreneurs throughout Lancaster County!

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