Sunday, 22 July 2018

Information and commentary for the small business banking industry

How banks can help small businesses maximize their cash potential

17 Jun

These days, banks are more than just lenders to small businesses. Most banks have small business divisions, where their staff are focused specifically on helping small businesses expand and grow. So it’s important that you, as a small business bank, get the message across to your customers that you’re not just a glorified ATM – if they need more money, you’ve got some tips to help them find it, without increasing their loan capacity.

Small business owners, especially if they’re considering an expansion project, are often surprised by just how much their own internal resources can be maximized to provide at least some of the cash they need. What you can do as their banking partner is sit them down and go through those options, before resorting to borrowing more money.

The banker becomes the small business consultant

So here’s where you get to switch hats. Instead of talking about a small business owner’s assets in terms of collateral, you get to work out how they can be used to raise more cash.

Help your small business customers to explore all available financing options for their growth plans. Some suggestions you can make are:

  • Improve cash flow – yes, we always come back to this one but that’s because it’s the most effective and fundamental way to find more money. Show them how to tighten up their debt collection practices, reduce costs and consider leasing equipment rather than buying. Walk them through a cash flow forecast and then offer them a guide on how to manage and improve their cash flow. Here at TSBC, we’ve got content available that can help you do both.
  • Get better deals from suppliers – if your customer has a good relationship with their supplier, chances are they can negotiate a better deal with longer payment terms so they can free up more cash.
  • Explore investment options – talk to your customers about angel investors. It could be that you have a list of angel investor groups or networks that you can put your customers in touch with. If you think the growth plans laid out by your customer have real potential, consider introducing them to bank clients who you know are looking to invest in growing businesses.

It’s important for you as their small business banking partner to encourage their growth plans, but also to make sure they’re realistic. Will they have enough money to finance their expansion without impacting their core activities? So not only are you helping them to find more money using their own internal resources, but you can also gently restrain them if you think they’re biting off more than they can chew.

Here at TSBC, we’ve got plenty of content around growth plans, cash flow management and raising capital. Get in touch with us so we can help boost your online content.

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