Dallas Small Business Financing Guide

Dallas is a great place to do business. The Dallas Fort Worth metropolitan area has recently increased at a growth rate that surpassed other areas within the U.S. based on estimates provided by the U.S. Census Bureau. And according to the Dallas Office of Economic Development, of all of the businesses that operate in Dallas, 80% of them are considered small businesses.

You may be wondering, “How do I finance a small business in Dallas?” Or “What do I need to know about financing a small business in Dallas in order to get started?” When launching a new business in Dallas, more is required than just understanding your niche, finding the ideal location and knowing about zoning. Having access to financing is just as important, and sometimes more: You’ll need to have enough cash to operate without having to close your doors.

One key area is knowing how to manage your cash flow, which is notoriously difficult for start-ups — and an area where many small businesses fail. It’s crucial for business owners to know exactly where their financing will come from to avoid cash shortages.

Unfortunately, it’s not enough to rely on the cash generated from sales to keep your business afloat, as that is one of the significant problems that many business owners face. For example, if companies have slow, poor performing months, they will experience cash shortages if there aren’t other cash management and funding strategies in place. You might find yourself borrowing from one month to pay past expenses, and it’s extremely hard to get ahead when you’re constantly playing catch-up
with your cash flow.

In addition to that, even businesses that have very well performing months throughout the year could still experience cash shortage issues. If a company is performing well throughout the year, but the majority of their clients pay on terms, meaning a company makes a sale today but collects the payments in 30, 60 or 90 days, they will still experience major cash shortage issues.

As a leader in the commercial finance industry, we have a great deal of experience helping Dallas area businesses navigate funding options such as small business financing, SBA loans, a line of credit, and other ways a Dallas entrepreneur can keep a small business open and help it thrive.

In this guide, we will discuss the various ways that Dallas based business owners can develop cash strategies to keep their business afloat like so many other businesses that operate in the Dallas area.

Loans and Lines of Credit

As a small business owner, it’s great to set up a bank account and develop a great relationship with your bank, credit union or the SBA before your business is actually in need of a loan. It’s important to show financial statements that indicate you do currently have some form of cash flowing into the business. When taking this approach, you actually look better on paper and will likely qualify for a loan that you may not need right now. In fact, it will help build credibility as you’ll be able to repay the loan with ease.

Let’s say you take out a $5000 SBA loan that you don’t currently need. if you repay the loan within the next six months, you would have built credibility with your lender. That suggests to them that they can trust you to make your payments on time when you apply for the loan again. The next time you apply for a loan, you will already be in good standing and appear less of credit risk. While you’re waiting for receivables to come in within the next 30 to 90 days, the loan will allow you to stay afloat and cover payroll and other expenses.

Debt Financing Vs. Equity Financing

If you do decide to take out a loan with the bank, a credit union or the SBA, that’s typically referred to as debt financing.

When you take out debt financing, the loan is typically payable every 30 days whether you generate additional cash or not.

With equity financing, however, there’s usually an equity partner involved or an investor who puts up the money to cover your business cost and expenses. An investor comes on board from a different angle and understands how business works and the time that it takes for profits to be generated. Even if your business is making a profit, you still may not have the cash you need to fully operate your business. Primarily due to the issues
indicated above — making sales on credit, which means your cash is tied up in accounts receivables for 30 to 90 days. But there may be other issues as well, such as a demand for better-performing equipment that provides more output to accommodate the demand of your customers. You may also experience growth spurts, which could also require an output of cash at various times to meet the demands of your customers or to fill orders.

An equity partner or an investor is a lot more sensitive to this type of business activity that is typical in most business ventures. They would need to determine when the breakeven point would be reached and when they’d be repaid a return on their investment. The downside is that you’d likely have to give up a portion of your business.

Taking Advantage of Dallas-based Financing Options

As a Dallas based business owner, you should consider taking advantage of the financing opportunities that are available in our area. For example, there are funding sources that are specific to the Dallas area designed to expand the financing options needed by Dallas-based businesses. They consist of the Texas Enterprise Fund, the Southern Dallas Development Corporation, and the South Dallas Fair Park Trust Fund.

If you haven’t opened your business yet but are exploring funding sources, it’s important to do your research. Prior to launching your business, it’s important to develop a funding plan to increase the chances of your business succeeding. Having a solid plan and making the right decisions about obtaining finances is a critical component to sustaining your business venture for the long haul.

Let Commercial Capital Lending, LLC help you take the next step to help your business grow and thrive.


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