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How to Grow and Flourish - Business Banking and You

   Right from our very earliest days, when we first walk in with our piggy bank full of pennies, banks play an important role in our financial security. But banks are more than just a giant storehouse for our money. For anyone in business, banks do play a key component in the corporate structure. Regardless of whether you have a small or large business, an new or well-established business, banks are important allies in allowing a sense of financial security when undertaking business ventures, or providing the means to enter into such ventures, which might not be possible using only your own capital. It is important to establish a positive working relationship with your bank and there are certain measures which you, as a business person can take in order to secure this relationship.

   While certain people feel that banks should finance every business venture proposed to them which seems like a good idea this is certainly not the case. Since banks lend their own depositor's funds it is essential that they be convinced of the viability and success of proposed venture. However, there are ways which can help your convince your bank manager of the worth in aiding you and your requests.

   The first is to be prepared when you meet to discuss your venture with the bank. Be ready with a complete plan of the parameters and expected gains of your proposed venture. This enables a faster response as it saves time in interviewing and information gathering in regards to your request.

   The second way is to be cooperative when dealing with the bank. It is important to build a relationship of trust between yourself and your banker. Be willing to provide any information which is request and be sure to punctual and reliable in all dealings with the bank. You must remember that the bank is there to help you, but first you must be willing and ready to help yourself.

   A third thing to consider is that banks look for security in the loan ventures. Be fully committed to your business and your proposed ventures. This can include personal guarantees which indicate a sincere belief in the success of the proposed enterprise, and the amount of your persona equity or investment which is at stack venture. In this way your bank is not the soil which allows the plant to grow, but the water and sunlight which makes it stronger and healthier.

   In securing financing for your ventures it is important to consider what type of financing is best suited for you. Essentially there are two types; equity financing by private investors and debt financing.

   Equity capital is financing given in the exchange for ownership of shares or a piece of the pie of the corporation. As such, it usually requires unanimous consent of all shareholders. Among the benefits of equity capital are:

1. While there is a greater risk there is also a greater return.
2. If you are in default. Shares out vote you based on the convenence.
3. It allows for long-term financing as equity has no maturity date.

   Debt capital is, simply put, conventional bank loans. It is primarily used where the lender does not have any equity or ownership in the business and, therefore, no active say in the operations of the business. When dealing with debt capital there is also the consideration of repayment which includes 100% of the amount borrowed plus interest costs. Among the features of debt capital are:

1. It improves your return on investment.
2. It reduces your taxes and your choice of bankruptcy as the more "unsecured" debt you have the more patient creditors will be with you.
3. Debt capital means that you keep control.

   While there clearly more business banking then this, it is important to remember that banks are there to help you. Thus, the key to a successful relationship is finding out what sort of financing is right for you. But when dealing with your bank manager, remember to deal with them in positive fashion in order to allow your business to grow and blossom into a healthy and strong, and hence successful, venture.