Insights into the world of small business lending and development
Financial experts weigh in on the importance of National Financial Literacy Month for small business
In April, we celebrate National Financial Literacy Month, which serves as an opportunity to review your finances, assess your financial literacy and how it can help you take your business to the next level. In celebration of this special month, we reached out to some of our Venturize partners to get their thoughts on National Financial Literacy Month, key advice for business owners, and how their organizations work to support the small business ecosystem.
Panel of experts
Casey Estrada (CE): Casey Estrada is the Director of Investments at Founders First Capital Partners, an organization that works to provide access to critical capital that businesses need to unlock their economic potential.
Gerri Detweiler (GD): Gerri Detweiler is an Education Consultant at Nav, a financial tech company that aligns qualifications, predicts needs, and facilitates transactions between data providers, lenders, partners, and small businesses.
Linden Jackson (LJ): Linden Jackson is a Financial Wellness Coach at Operation HOPE, an organization that financially uplifts individuals and communities since 1992.
Q1: What does financial literacy mean for small business owners?
CE: Financial literacy is the key to understanding your business and unlocking further potential for growth. Business owners don’t need to be accountants to be financially literate, but they do need to understand enough to comprehend the inner workings of their businesses.
Furthermore, being able to identify areas of the business to invest in should always be top of mind. Should more attention be paid to marketing efforts, product development, customer service? These foundations all require capital and understanding the financial structure of the business can help you identify where money should be spent.
GD: Financial literacy is a key factor in small business success. You need to know enough about your business finances to ensure the business is profitable, that you and your employees earn enough to meet personal financial goals, and to ultimately build a business that is financially healthy.
LJ: Financial literacy can provide small business owners with an opportunity to take advantage of information that can catapult them to new heights. Traditionally, small business owners have been challenged with a lack of information, but right now there is an abundance of information and assistance that can help them grow their businesses in many ways.
Q2: What are some key pieces of financial literacy that entrepreneurs should pay attention to?
CE: Simply put, business owners should have a grasp on their financial statements. How does the profit and loss statement, balance sheet, and cash flow statement reconcile with each other? What could the business do with an influx of cash that would be a worthwhile investment?
Additionally, how can you leverage other people’s money to accelerate growth? Whether it’s an equity investment, debt, or a loan from a family member, securing capital to set up the business for the future is paramount to success.
GD: Key areas of building a financially healthy company include making sure your personal and business credit are strong and will support the business when it needs financing. You want to make sure your bookkeeping is up to date and that taxes are paid on time. A business bank account that you use only for business purposes is essential. And when making business purchases, it's a good idea to use business credit and debit cards, rather than personal ones.
LJ: Start up assistance such as grants and loans, educational information including data and webinars, templates for business plans, budgets, and mentors that can guide them along the way.
Q3: How can underbanked or unbanked entrepreneurs get started?
CE: Start small and be scrappy. Find ways to generate revenue that will allow the business to scale even if it’s not the end-goal of the business plan. Like Amazon selling books, or Costco selling only to business owners, find a way to grab a foothold that can later be expanded upon.
GD: Start by opening a business bank account. There are more options than ever before, including online banks that have low or no minimum balance requirements. They are likely to offer you a business debit card, and if you qualify, consider getting a business credit card as well. Check and monitor your business and personal credit. There are more than 138+ places to check your credit scores for free. Either take a bookkeeping class or hire a bookkeeper and work with an accounting professional to make sure your taxes are paid on time. Many SBA Resource Partners offer free or low-cost classes to help you get started with an accounting software program. Once you've taken these steps, you can apply for a microloan or small business line of credit.
LJ: There are plenty of banks that support entrepreneurs, as well as CDFIs (Community Development Financial Institutions). There is also a lot of information available through government agencies like the SBA and SCORE. We here at Operation HOPE also have a breadth of banking partners that want to help too.
Q4: How does your organization support financial literacy in the small business ecosystem?
CE: Founders First supports small businesses through accelerator programs, workshops, and even direct access to capital with a focus on making sure businesses are financially sound. If a business isn’t quite ready for our funding options, we’ll work with them to clean up their books, enroll them into one of our programs, or connect them with appropriate resources.
GD: Nav helps business owners leverage their data to help build financially healthy companies. Small business owners can sign up for a free Nav account to check and monitor their personal and business credit, then get matched to financing offers based on their qualifications.
LJ: Operation HOPE goes the distance to help small business owners grow in many ways: We have an exclusive, 8-week entrepreneur training program, as well as one on one coaching sessions, plus technical assistance programs. Our latest initiative, Financial Literacy for All, is a national initiative to embed financial literacy into American culture, led by a prominent group of leaders from the business, sports, entertainment and nonprofit sectors.