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Five Tips to Help Women Business Owners Build Credit and Access Capital

By Beverly Muguerza, Wells Fargo Business Banking manager

Women-run businesses play an important role in our local communities and economy, making it all the more important they have the financial guidance and tools they need to succeed financially, including access to capital.

The latest Census data shows women-owned businesses increased by more than 20 percent from 2002 to 2007. According to the U.S. Small Business Administration, women-owned firms make up almost a third (29 percent) of all nonfarm businesses across the country, generating a total of $1.2 trillion annually, and employing 7.6 million people.

Like all businesses, women-owned businesses face unique challenges, and in today’s economic environment acquiring capital to operate and grow their businesses can be one of them.

At Wells Fargo, we have the opportunity to work with women entrepreneurs on a daily basis. We know the important role women-run businesses play in our local communities and economy, and we want to make sure that women business owners have the financial guidance and tools they need to succeed financially, including access to capital.

Here are five key financial tips to help women entrepreneurs build their credit profiles and obtain the financing they need to grow their businesses:

  • Get to know your lender – Establishing a relationship with a banker is the first step to helping you get credit-ready because a banker can help identify financial solutions that meet your business needs and work with you to determine your long-term business goals. Bankers have experience working with a variety of businesses, so they can be your best resource when it comes to business financing. Once you have established a working relationship with a banker, it’s important to keep them informed as your business and financing needs change.
  • Build a strong credit profile – Good credit is one of a business owner’s most valuable assets. As more women follow the path of entrepreneurship, it’s important that good personal financial habits transfer over to their businesses. When applying for financing, lenders will look beyond just the credit score to understand if your business is thriving; they’ll also review your debt-to-income ratio, and whether you have a history of on-time payments.
  • Explore financing options – According to the National Association of Women Business Owners (NAWBO), the major sources of funding that women business owners rely on are personal savings, reinvested business earnings, lines of credit, equity financing and venture capital. Business owners have many financing options to consider these days. If a conventional business loan or government-guaranteed loan doesn’t meet your specific needs, you may want to explore a SBA 7(a) loan. Talk with your banker about which credit option is best for your business.
  • Maintain a positive cash flow – Profitability and cash flow are essential components of credit capacity, and showing that your business has enough cash on hand to meet both short- and long-term commitments demonstrates to lenders that you have the ability to repay a loan. Achieving and maintaining positive cash flow takes hard work. Set aside time for regular cash flow analyses, and keep your financial information up-to-date so it can be easily referenced.
  • Separate business and personal accounts – Your business credit profile begins when you establish dedicated business accounts. While many small business owners use personal finances to pay for business expenses, it’s important to establish separate business accounts. Having separate business accounts is one of the first steps to show your business is sound and well-managed when applying for business credit, and helps you maintain accurate and complete records of all your income and expenses.
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