Starting a business can be daunting, even overwhelming. The good news is Seattle Credit Union Credit Union provides solutions. For the myriad of questions you may have, we have answers.
Below we have a variety of resources for businesses ranging from those are still in the idea phase to businesses who may have formed and are looking for additional resources. The first is for the entrepreneur looking to get started. The second is for the seasoned business owner who may need a little more advice.
Starting a business involves planning, making key financial decisions and completing a series of legal activities. These 8 steps can help you plan, prepare and manage your business. Written in roughly chronological order these steps will provide the roadmap to your success. These steps may overlap, or not be necessary for you but will guide you to getting on your feet. You can also learn how to start a business with Washington State Department of Revenue, and with the Internal Revenue Service.
Use tools and resources to create a business plan. This written guide will help you map out how you will start and run your business successfully. Naturally the first step is to get the idea out of your head and on paper. You have the vision, break that vision in to measurable goals then make steps for meeting those goals. Focus on what excites you about the product, about the need for it, and how the market is currently failing to deliver it. Then go on to determine some projections on your needed start-up expense, and cash flows. If it is an entirely new product you may have to do some market research to fine tune your offering. (Many businesses won’t need this last step.)
Then get into the nuts and bolts of your operational plan and your marketing plan. Answer these important questions:
Consider your competition, and suppliers. Your competition may have experience, but you have a fresh prospective. Leverage your fresh perspective to gain a competitive advantage.
Look for ways to keep costs low, refine business processes and create a smooth, lean, process. A good article on resources for making business plans can be found here.
If you are wondering how you can accept payments from your customers you are in luck. Seattle Credit Union has partnered with TSYS a leading direct processor of transactions. If you would like more information please submit your contact information to them by visiting their website.
Take advantage of free training and counseling services for everything from preparing a business plan to securing financing. Local trade groups and professional associations may offer classes to get you started. Visiting trade shows can give you a sense of the business environment and challenges that may lie ahead.
A physical space can be costly, do you even need one? Many retailers start with an online presence. Professional services, like consultants, can meet clients at their office or telecommute. There are also business space alternatives. If you do need a physical retail space, consult your business plan to help determine an exact location.
Alternative Work Spaces:
Business Incubators are co-working spaces for entrepreneurs to work together, connect, meet and network as they develop their businesses.
Tools to help work remotely
Financing a business can come from many different locations. Credit for your business is useful in gaining equipment, or smoothing the peaks and valleys of your business cycles. Lines of credit are especially handy, covering unexpected expenses quickly. Using your own money is the most common option. But, there are alternate sources like government backed loans, venture capital, and research grants to help you get started. Crowd sourcing is another option, there are websites which coordinate fund raising from anyone; friends and family to total strangers who think you have a great product.
Seattle Credit Union is now a source of financing your business. We offer Lines of Credit, Secured and Unsecured Loans, Credit Cards, Vehicle loans, and Real Estate Loans. Typically we require a business be active for 2 years, however if you’re running, and profitable we can help. Consider your business needs. Review your financials and call us at 206-395-5500.
Decide which form of ownership is best for you: sole proprietorship, partnership, Limited Liability Company (LLC), C Corporation, S corporation, nonprofit or cooperative. There are a lot of guides on this topic. We recommend doing lots of research and talking to an attorney, or CPA.
The University of Washington School of Law works with small businesses and can provide legal counsel on topics ranging to business plans, structure, employment law, and intellectual property.
Determining your tax structure is another conversation littered with nuance and technicalities. Seattle Credit Union recommends you talk to an attorney or an accountant to find what is right for you and your business. If you decide your business needs its own Tax ID number you can apply for one on the Social Security website.
Register and License with the state to get a state tax identification number (UBI #), workers' compensation, unemployment and disability insurance. The details vary from state to state. You may also need a business license for the city you are in as well.
Register your business name with your state government.
Learn the legal steps you need to hire employees. Hiring employees should not be taken lightly, and there are a couple key concepts that you should understand before you hire. You should check with your local Labor & Industries department, learn about Labor Taxes, B&O Taxes and industry hiring practices.
It's one of the most common questions among business owners seeking financing: "What will the financial institution be looking for from me and my business?" While each lending situation is unique, many financial institutions utilize some variation of evaluating the five C's of credit when making credit decisions: character, capacity, capital, conditions and collateral. We'll take a look at each of these ingredients and how they may impact your funding request. Review each category and see how you stack up.
Character — What is the character of the management of the company? What is management's reputation in the industry and the community? Financial institutions want to put their money with those who have impeccable credentials and references. The way you treat your employees and customers, the way you take responsibility, your timeliness in fulfilling your obligations — these are all part of the character question.
This is really about you and your personal leadership. How you lead yourself and conduct both your business and personal life gives the lender a clue about how you are likely to handle leadership as a CEO. It's a financial institution's responsibility to look at the downside of making a loan. Your character immediately comes into play if there is a business crisis, for example. As business owners, we place our personal stamp on everything that affects our companies. Often, financial institutions do not even differentiate between us and our businesses. This is one of the reasons why the credit scoring process evolved, with a large component being our personal credit history.
Capacity — What is your company's borrowing history and track record of repayment? How much debt can your company handle? Will you be able to honor the obligation and repay the debt? There are numerous financial benchmarks, such as debt and liquidity ratios, that financial institutions evaluate before advancing funds. Become familiar with the expected pattern in your industry. Some industries can take a higher debt load; others may operate with less liquidity.
Capital — How well-capitalized is your company? How much money have you invested in the business? Financial institutions often want to see that you have a financial commitment and that you have put yourself at risk in the company. Both your company's financial statements and your personal credit are keys to the capital question. If the company is operating with a negative net worth, for example, will you be prepared to add more of your own money? How far will your personal resources support both you and the business as it is growing? If the company has not yet made profits, this may be offset by an excellent customer list and payment history. All of these issues intertwine, and you want to ensure that the financial institution perceives the business as solid.
Conditions — What are the current economic conditions and how does your company fit in? If your business is sensitive to economic downturns, for example, the financial institution wants a comfort level that you're managing productivity and expenses. What are the trends for your industry, and how does your company fit within them? Are there any economic or political hot potatoes that could negatively impact the growth of your business?
Collateral — While cash flow will nearly always be the primary source of repayment of a loan, financial institutions look at what they call the secondary source of repayment. Collateral represents assets that the company pledges as an alternate repayment source for the loan. Most collateral is in the form of hard assets, such as real estate and office or manufacturing equipment. Alternatively, your accounts receivable and inventory can be pledged as collateral.
The collateral issue is a bigger challenge for service businesses, as they have fewer hard assets to pledge. Until your business is proven, you're nearly always going to pledge collateral. If it doesn't come from your business, the financial institution will look to your personal assets. This clearly has its risks — you don't want to be in a situation where you can lose your house because a business loan has turned sour. If you want to be borrowing from financial institutions or other lenders, you need to think long and hard about how you'll handle this collateral question.
Keep in mind that in evaluating the five C's of credit, financial institutions don't give equal weight to each area. Lenders are cautious, and one weak area could offset all the other strengths you show. For example, if your industry is sensitive to economic swings, your company may have difficulty getting a loan during an economic downturn — even if all other factors are strong. And if you're not perceived as a person of character and integrity, there's little likelihood you'll receive a loan, no matter how good your financial statements may be. As you can see, lenders evaluate your company as a total package, which is often more than the sum of the parts. The biggest element, however, will always be you.
At Seattle Credit Union, one of our 7 guiding principles is education should be free to all. We are committed to the success of our community and value the local economic impact our business owners bring to the communities where we live, work and serve. The Business Solutions Department at Seattle Credit Union is committed to helping business owners be success in any way we can. If we can be of any assistance, please don’t hesitate to reach out to us by calling (206) 398-5530.