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Who Owns Who?

Growing up my father would always talk about the value of money. When he talked about the banking system one of the things he would tell us was “if you owe the bank $1M then the bank owns you, but if you owe the bank $10M (maybe in today’s parlance $100M) then you own the bank”. What he meant by that was the larger the loan, the more of a liability you or your business were to the bank.

I know that these sound like fascinating conversations to be having as a youngster, but his saying has never rung more true than in today’s environment. As we watch billions of dollars being allocated to banks to help small businesses with both payroll loans and emergency financing to keep these businesses open, I fear that banks are also worried about their own bottom line and will allocate these funds to businesses that might have a larger impact on the bank’s own solvency. Without real guidelines around the process and what constitutes a small business, will we end up just saving the larger businesses while true mom and pop businesses fall by the wayside? If this is the case, we will see a dramatic long-term impact on our economy, as according to the SBA, small businesses create 64% of the new jobs each year.

Based on this environment a couple of things that are always helpful to keep in mind as a business owner:

  • Get to know your bank – knowing your banker is helpful both when you are in trouble and when you are growing. It can result in faster transactions and less red tape.

  • As soon as you are large enough, add a second bank. Like anything, you get the best results when people/banks compete for your business.

  • Local banks can be great places to start banking when you start your business – you are more meaningful to them and you see them in your local community. They may not have all of the bells and whistles as some of the bigger banks but they have the local touch, and decisions are made locally.

  • Understand your financials – it is hard to access any of the above forms of capital if you don’t have a grasp on your financials and cannot produce them when asked (i.e. a bank statement is not your financials).

  • Know all of your financing options – banks aren’t the only people that invest in small businesses - community development funds, grants, state universities, pitch competitions, Angels, VCs and alternatives like Sage Growth Capital.

Sage Growth Capital makes revenue-based investments in regional companies who need growth capital. It is our mission to provide a more flexible funding option to growing companies who do not fit traditional equity or lending models. To learn more about Sage Growth Capital or to apply for funding visit:

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