Heather Dodig, vice president, business banking officer, PNC Bank
The economy is slowly improving, and you’ve decided the time is ripe to realize your dream to begin a second career. Or perhaps you’re already retired and are eager to turn your hobby into a business. So, what now?
First, do your research. While banks are eager to lend, you’ll need more than just your passion and great ideas to get started. It’s more important than ever to have a strong understanding of the opportunities and industry, a thorough business plan, a solid financial background and a realistic evaluation of your chances for success.
Once you have your bearings, talk to an expert. Those aspiring to an “encore” career can benefit from the advice of Carol Ball, a former day-care center manager whose second career has been the Cleveland-area C.J. Henry & Associates Counseling Center she has co-owned for the past 20 years. Back then, she didn’t go to a bank loan officer but a business acquaintance who looked over her figures and said the center wasn’t financially viable.
“Luckily,” she says, “my spunky Welsh husband and I concluded that we would make it work.”
They rented a suite with two offices for $237 a month and paid the rent from their consultancy fees.
Today, the 66-year-old grandmother of nine says she would seek a bank loan to purchase the space. She notes that since 1991, the center has paid a lot of money in rent that could have gone toward purchasing the suites and seen them appreciate in value.
Ball says she has gained a broader perspective of how a bank can help a small business grow. The counseling center has increased to 11 counselors from two, and last year it handled 6,000 counseling sessions. Its counseling specialties have expanded, as well. The center grew so much that Ball and her co-owner sought a loan to rent two other office suites to handle the workload.
They came to PNC, where a business banking officer looked at their financial picture and their growth, as well as their projections for future income growth to support the expansion. The officer visited the counseling center and the additional office space, examined the quality of the counseling staff and, within two weeks, developed the lending package.
For second-careerists mulling the plunge into a new business, here are several tips that Ball and PNC offer:
- Assess your experience in the industry you’ve chosen. Conduct as much research as possible, making sure you determine your competition, the demographics of the area in which you will locate, and how you will differentiate yourself.
- Have a thorough business plan. A bank will want to see three years of projections. Recognize, too, that it can be challenging to get a loan for a startup business right now so the more prepared you are, the better.
- Ensure you have plenty of anticipated cash flow. Do you have enough cash in reserve should the business start off slower than you anticipated? It’s important to have at least one year of living expenses, especially if you have a mortgage.
- Make sure your personal finances and credit standing are in good shape. Both will be important to the bank considering your loan application.
- Consider working with the Small Business Administration. Ask your local banker if you qualify for a loan offered through the Small Business Administration. SBA loans can serve as a valuable financing alternative. They also offer a variety of tools and resources to help businesses succeed.
Remember: If you ensure your dream of a second-career is based in reality, you’ll be better positioned to achieve your encore performance.
Heather Dodig is vice president, business banking officer, PNC Bank, in the Cleveland area.
Five tips on growing your business
If you believe now is the perfect time to expand your business, consider these tips to achieve that growth:
- Crunch the numbers. If you plan to purchase capital equipment, review the numbers. You also may want a contract in hand. A letter of intent could pre-qualify you for a loan, but unless you have an actual contract, your bank may hesitate to provide funds.
- Update your business plan. If you want to open a second location and need funding, your bank will want to see as detailed a plan. Be sure to look several years ahead to project realistically your income, expenditures and growth.
- Do your research. Just as you did when you first began your business, look at your competition, service area and the changing demographics of your market. Conditions likely have changed in your region since you last created a business plan.
- Investigate specialty lending programs. Check with the Small Business Administration to see how it can help — not only financially but also in terms of research and current business information. Talk to your bank about other government programs that may be available for your project.
- Get the most out of your business today. By meeting with your banker, you can determine whether you’re maximizing your cash flow and other money-saving tools, such as treasury-management solutions, workplace banking offers for your employees and other available rewards.