The role banks play in the development of large, medium, and small businesses cannot be downplayed. Banks will forever remain critical in the growth and advancements of businesses.
Businesses, also, are important in enhancing economic growth. Entrepreneurs are an asset in every aspect of a country’s economy. Innovations and job creation which result in the prosperity of the society are some of the contributions businesses have to offer.
Governments globally are pushing for more young people to venture into business. These latest developments have made banks come up with newer and better ways to help the rising entrepreneur.
On that note, we shall now look at the various ways banks are aiding in the growth of small and medium enterprises.
Offer financial aid
This is one of the biggest role of banks to businesses, especially for start-ups. Not everyone has a strong financial background when starting a business. The largest percentage will seek financial assistance from banks.
To get a loan, businesses have to have a track record. Your business account has to show growth in sales and business assets, as well as show believable future sales projections.
If yours is a start-up, until you build a good business bank account, a business loan will only be given to you if your personal account is strong enough to support the loan. This also means that the bank will need collateral such as your home, piece of land, your car or any other asset you may have.
However, banks realize that small and medium enterprises are one of the fastest-growing sectors of the economy and will come up with competitive interest rates and less collateral needed to secure a loan. This is in a bid to attract more entrepreneurs their way.
Offer investment opportunities
Whether a large, medium or small business, one of the surest ways to ensure growth is profitable investments. All commercial banks have an investment department that will parade before you an array of investment opportunities for your business. From trading in stocks to purchasing bonds, money market accounts and investing in real estate, the number of investments to try are endless.
Furthermore, by doing the above, you will be getting into the loan departments’ good books.
Help business better manage their cash flow
A streamlined cash-flow is everything to a business. Some small business entrepreneurs will wait until they have cash flow issues to call their banker. However, this should not be the case.
The first step to do this is by offering financial statements. This will show the amount of income the business is getting and also the expenses it suffers, categorizing each entity separately.
Banks will go a step further and help businesses create a profit-and-loss-statement. This is crucial to entrepreneurs as it helps them have the exact idea of how their businesses are doing.
Additionally, banks in conjunction with the business owner will create various financial reports for things such as tax documents that enable the entrepreneur to be conversant with the various mandatory taxes that affect the business.
Streamline financial transactions
Another important role of the bank in small and medium businesses is to streamline payments and employee payroll.
The Internet and other innovations have given rise to powerful platforms that banks use to automate payments to employees as well as other recurring transactions. It not only saves time but also keeps money in the business until a time that it is to be transferred.
With such digital payment solutions, salaries are deposited directly into employee accounts with ease. Through this, businesses are able to better manage their day-to-day finances.
Banks work with people and organizations from different economic sectors. Whether you are an entrepreneur who needs a marketing company or are looking to partner with organizations from a particular niche, do not underestimate your banker’s ability to facilitate such relationships.
A good bank has a robust network of contacts; especially people and organizations from your community. The best thing is to provide them with prospects you would want to work with and with a little convincing, a bank can leverage them to help your business. This could mark the beginning of a great working relationship or a greater partnership.
Additionally, a business could contact a bank if they need a reputable attorney or an HR consultant.
Provide corporate credit cards
To further keep track of your business expenditure, banks offer corporate credit cards. This is useful as all the business expenses will be on one statement.
To a bank, corporate credit cards are an unsecured loan which no collateral is needed. A business owner should give this to the company’s management team and instruct them to use them to make company purchases.
However, it is good to realize the importance of establishing a fine line between business and personal credit cards. By doing so, you eliminate the possibility of one affecting the other.
For instance, if you missed a few payments on your personal credit card, it would not be good if that showed up on your business credit card as it would hurt your credit score.
Work as your knowledgeable advisor
It is advisable for an entrepreneur to try and foster a good relationship with their bank. It is in this regard, that they may ask for an annual meeting to discuss their future prospects and their specific plans for growth.
Besides, a business owner should ask the bank to do an annual review of the companies statements. Look into the company’s expenditure then come up with ways of saving more money.
In the corporate setting, banks are the trusted advisors of many large companies and organizations. They play a great role in ensuring their growth and advancements. Small and medium enterprises should also make use of their banks in this way and expect the same kind of support accorded to large enterprises.
Small and medium businesses should realize that a good commercial bank can help them identify good opportunities for growth. Actively involving the bank in your businesses, strengthens your bond. It also provides you with a trusted ally, partner and advocate.