Oregon is home to nearly 400,000 small businesses. Many of these ventures started with a great idea. But to turn a concept into reality, you need working capital.
A small business loan can help you get your business off the ground or take an existing one to the next level. Keep reading to learn the steps to getting the business financing you need to make sure your company stays strong and healthy.
First: Address Your Long-Term Needs
Determining whether your small business needs more working capital involves assessing your current financial situation, analyzing your cash flow, and understanding the specific needs and challenges your business is facing. Here are some steps you can take to evaluate whether your small business requires additional working capital:
- Analyze cash flow: Review your cash flow statement to understand how money is flowing in and out of your business. Identify patterns and trends in your cash flow, such as seasonal fluctuations.
- Calculate working capital ratio: Your working capital ratio is the ratio of current assets to current liabilities. A ratio below 1 may indicate that more capital is required.
- Forecasting: Create financial forecasts to project future income, expenses, and cash flow. This can help you identify potential shortfalls in working capital. Consider different scenarios to understand the range of possibilities.
- Analyze accounts receivable and accounts payable: Examine your accounts receivable to ensure that customers are paying invoices on time. Delayed payments can affect your cash flow. Evaluate your accounts payable to see if you have outstanding bills that need to be paid. Timely payment can impact relationships with suppliers.
- Identify operational challenges: Identify any operational challenges that may be affecting your cash flow, such as inefficiencies, high overhead costs, or production bottlenecks.
- Check your emergency fund: Evaluate whether your business has a sufficient emergency fund to handle unexpected expenses or downturns in the market. A lack of reserves may indicate a need for additional working capital.
- Evaluate debt service coverage: If your business has existing debt, assess whether your cash flow is sufficient to cover debt service obligations. Difficulty in meeting debt payments may signal a need for additional working capital.
- Track customer and market trends: Monitor changes in customer behavior, market trends, and industry conditions. Anticipating shifts in demand can help you proactively manage your working capital.
Startup Business Loans
Perhaps you’re wondering how to get a business loan in Oregon if you’re just starting out. Obtaining a loan at startup isn’t as simple as going to the bank, filling out an application, and receiving the capital required. There are few financial institutions that are willing to lend to a business with no track record.
That doesn’t mean there aren’t options available, though. Startup loans generally require collateral to secure the loan, as well as some cash investment from the owner.
A business plan is essential, and if you are new to business you may not be familiar with the business planning process. But don’t worry: Oregon’s Small Business Development Centers (SBDCs) specialize in helping you formulate thorough plans that can help you get the funding you need.
A strong business plan outlines several key elements of your business model, marketing strategy, product or service development, and structure. Here’s what your plan needs to include:
- A detailed description of products or services, including their strengths, weaknesses, and plans for upgrading or adjusting them.
- Profiles of your target customers.
- Marketing strategies for each kind of customer.
- The sales techniques and tools you will need.
- Product development life cycle plans, including the future phases of development for each product or service you provide.
- A plan for how you will spend the money you borrow.
- A financial plan outlining when and how you will repay your funds.
- Your business structure (LLC, corporation, etc.).
- A detailed outline of each principal’s responsibilities.
- A description of the physical resources, equipment, inventory, and other items needed to support your business.
- Any real estate requirements, such as a shop or office space rental.
- At least two years of monthly financial projections.
Once this is accomplished, you can approach a lender that offers loans to startups with the kind of plan that inspires confidence in your success.
Small Business Loans for Existing Businesses
As with startup loans, a business plan is essential to securing funding for your existing business. Whether you’re looking for a working capital loan, a small business line of credit, or a short-term loan, the Oregon Small Business Development Centers can help you make sure your plan has the right content and structure to give you the best chance of getting the capital you need.
For example, we can teach you how to emphasize your current earnings—and those you will receive as a result of the new funding—in a way that’s honest, realistic, and compelling for a lender.
Also, as a seasoned small business owner, your organization may have some qualities that can make it more appealing to a lender. An Oregon SBDC can help you identify attributes that can enhance the appeal of your business when approaching financial institutions.
Options for Obtaining Loans in Oregon
There are a variety of lenders, loan programs, and financing solutions for small businesses. Here are a few to consider:
- A private lender. A private lender can be anyone from a friend or relative to a venture capitalist. Regardless, you will need to have a business plan in place before approaching any private party about funding. A private lender can be an option for both startups and existing businesses.
- The Entrepreneurial Development Loan Fund (EDLF) from Business Oregon. This organization provides direct loans for startups and small businesses that made less than $1.5 million in the past 12 months or are owned by a severely disabled individual.
- Microlenders. Some organizations focus on microloans or smaller loans for both startups and existing businesses.
- Oregon Economic Development Districts. These are set up by the Economic Development Administration (EDA), which has districts across the state of Oregon that support the development of economies in those areas. In some cases, when a bank can give you only some of the funds you need, the Economic Development District in your area may be able to help you find the rest.
- Traditional bank. Most banks and credit unions offer small business lending, but they focus on lending to existing businesses with a solid cash flow. If your business has an established relationship with a bank, start there. Terms, interest rates, and loan products may vary.
- The Small Business Administration (SBA). While the Small Business Administration itself doesn’t lend money, it works with lenders and has standards you have to meet to qualify for the loans its lenders offer. Examples of SBA loans include SBA 7(a) and SBA 504. Both of these loans are generally more available to existing businesses.
How to Work with the Oregon SBDC
If you’re starting or expanding a small business in Oregon, you don’t have to go it alone. Both new and existing small business owners can work with a Center for guidance and resources. Even if all you have is an idea, an SBDC can help you get everything in place so you’re ready to approach lenders about getting a loan.
The Oregon Small Business Development Center Network and our Capital Access Team can help you transform your business idea—no matter how well-developed it is—into a solid plan designed to help secure the funding you need and ensure that you’re able to repay the loan.
With a strong business plan in hand, you’ll have plenty of options for securing a loan to fund your new or existing venture.
Ready to learn more about how the PCC Small Business Development Center can help you grow your business?
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