Overcoming hurdles to small business financing

  • Gladys Castillo

    Gladys Castillo

Updated 10/22/2019 3:56 PM

According to the U.S. Small Business Administration, Illinois is home to 1.2 million small businesses, which, collectively, employ nearly half of the private workforce in the state.

What's more, the individuals who own and operate small businesses are optimistic about what the future holds. Bank of America's Spring 2019 Small Business Owner Report found more than half of local small business owners (57 percent) anticipated an increase in revenue, and nearly 60 percent planned to expand operations in the following 12 months.


Still, small business owners face several common challenges, especially when it comes to financing their operations and planning for responsible, sustainable growth. With that in mind, Bank of America is happy to provide tips and resources for overcoming some of the most common financing challenges our local small businesses and entrepreneurs face.

Challenge 1: securing business credit

Many small business owners can face challenges with building business credit and securing funding at the outset of ownership. Often times, owners incorrectly believe that they need existing business credit to build new business credit, so they rely on their personal credit cards or lines of credit to finance their business ventures. There are often better options available.

Prior to extending credit, financial institutions will evaluate a business's ability to pay back loans on time. While some owners may be required to personally guarantee financing, banks are looking for several key indicators that repayment is likely. These include an owner's capital investment in the business, any business collateral, market conditions, character and an owner's willingness to communicate with his or her small business banker. Thus, it's important to ensure you can make a case for repayment, even when the business is young.

Challenge 2: Managing cash flow

Every business ebbs and flows, particularly those in growth mode, so it's critical to be prepared for a cash flow crunch by planning ahead. Owners should allocate time toward forecasting revenue and spending, ensure they have cash to cover 90-days of expenses, and structure finances so that they can survive the loss of a big client or cancellation of a substantial order.

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Regardless of where a small business is in its lifecycle, cash flow management is a principal concern for small business owners. Generally, to maximize cash flow, owners must find ways to increase the speed at which revenue is brought in, while decreasing the speed at which expenditures are paid out.

Small business owners who want to maximize cash flow have several options. If the timing for receivables is a chief concern, they may consider adding late fees to their invoices or adding an electronic payment option to expedite payments to the business. If expenditures are impacting cash flow, they may approach vendors and suppliers about extended repayment periods to 60- or 90-days. Some financial institutions will also work with their small business clients to extend repayment periods on lines of credit and business loans.

Challenge 3: Optimizing operations

Small business ownership and growth is time consuming, and many owners don't realize how many solutions are available to them -- many through their financial institutions -- to streamline their operations.

Owners should ask their small business bankers about products and services that automate some of the more tedious tasks, such as payroll and payment processing, billing and invoicing, and even digital banking services, that can free them up to focus on running and growing their businesses.


Every small business customer at Bank of America has access to a dedicated small business banking consultant who will visit their office, review their needs, and support owners on their path to optimizing operations.

Small businesses are the heart and soul of our city, and when they do well, Chicagoland does well. For more information and resources for starting, financing and growing a small business, please www.bankofamerica.com/smallbusiness or stop by your local financial center and ask to meet your small business banker.

• Gladys Castillo is Assistant Vice President, Small Business Banker for Bank of America .

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