An entrepreneur’s first advisor is sometimes his banker – and in a region as robust as the Triangle, bankers have a lot of advice for folks hoping to build out the next unicorn.
Triangle Inno asked some of the region's top bankers for their top startup advice.
Lee Fite, regional president at Fifth Third Bank (Nasdaq: FITB), said developing a solid business plan is key, as is developing a solid group of mentors and advisors – a group that should include at least one entrepreneur.
“Challenge every assumption and invite experienced partners to help test your plan,” he said. “Educate yourself and understand the financial aspects of your business plan. Good ideas can fail just like bad ideas. You will need to learn how to manage cash flow and prepare for difficult times.”
We asked bankers what a bank's role in a startup really is. Here's what they said:
We asked bankers: What's a bank's role in a startup?
Jim Hansen, regional president of PNC eastern Carolinas' market: Most startups are funded through friends, family, seed capital, or venture capital as they grow and evolve. Among the most important matters a banker can address are helping ensure the company is set up correctly, and providing access to technology-enabled solutions that make receivable and payable transactions easy. Banking tools and technologies matter because they allow entrepreneurs to focus on the business; for an entrepreneur, banking should be the easy part of operating a startup.
James Sills, CEO of M&F Bank: A bank’s role in a start- up is primarily to be an advisor. It is super important to launch a business with risk management in mind to limit mistakes or failure. I cannot over emphasize the importance of having a relationship with a Banker that understands your business and what you are trying to accomplish. As a start-up – a best practice is to set up check in calls during the year with your Banker to communicate what’s going well or not so well. The banker may be able to offer some advice or contacts to help solve the problem. Many start-ups rush into the bank once they start to make some sales and now they need access to credit to increase their sales. However, many start up business owners have never talked with a Banker or have a relationship with a bank and they get frustrated that they cannot scale their business. Again, it’s all about relationships.
Lee Fite, Fifth Third Bank: 1) Banks play a fundamental role in helping businesses and economies to thrive. That can include helping set up banking services that are necessary for capital formation and assisting with the flow of funds. Providing funding, depository services, cash and investment management are some of the traditional ways that Banks may be able to support a startup. Many banks are investing in cutting-edge technology that can help businesses by improving the quality and speed of information sharing to help business owners make important decisions quickly. 2) Equally important, Banks can play a critical role in helping the entrepreneur to network and connect to other subject matter experts or community leaders who may be in a position to share advice or services. 3) Understand that there are different types of capital providers just as there are different types of start-up businesses. Finding the right partner for you is important. 4). Remember, experienced Bankers are a wealth of information and can likely help you avoid certain pitfalls. Schedule time to allow for a thorough discussion and follow up.
Stewart Patch, regional president with Dogwood State Bank: A solid partnership with the right bank can be a critical element to the growth of a startup business. I would advise startup business to find a bank and a banker that act not only as a provider of services and products, but as an advisor and a consultant. The right banking partner sees all kinds of transactions and relationships, and can advise against previous pitfalls and challenges. Many bankers deal with a diverse set of customers across many different industries, and can add value through introductions and connections that lead to beneficial relationships for a startup company.
Mike Golden, regional president of the eastern Carolina region at Wells Fargo: One of the most important things an entrepreneur can do before pursuing financing for their new business is to get credit ready. It’s important to work with a bank that offers tools and resources that make financing easier to understand, and a banker who shows them what their business needs to get approved for a loan. Before applying for a small business loan or line of credit, a bank will want to see that the new business generates steady cash flow, has low levels of debt, and is in a strong financial position in order to manage debt payments. The more an entrepreneur knows about what bankers want to see in a credit application, the more prepared they will be to pursue credit for their business.
Ron Day, CEO of First Carolina Bank: For any entrepreneur, follow your passion in terms of starting a business. You will need that to endure the inevitable difficulties and unexpected events along the way. It’s also hard to have too much capital so save up first and have people and investors available to you when growth or setbacks occur (e.g. a global pandemic). Lastly, surround yourself with good advisors including a professional banker and accountant. Both will be invaluable in the startup process and throughout your business experience in helping you structure your finances and in making key strategic decisions.
First Carolina Bank
Jim Hansen, regional president for Eastern Carolinas at PNC Bank (NYSE: PNC), agrees that the business plan is the first step.
“Additionally, it’s important for founders to be purposeful when giving up equity or controlling interest in their companies – and to make sure they don’t give away too much of their companies too early,” he said. “With the Triangle being home to a vibrant startup community, entrepreneurs can easily seek out opportunities to connect with others who have been in their position for advice and learnings – or consult their banker, of course.”
Mike Golden, regional president of the eastern Carolina region at Wells Fargo (NYSE: WFC), said an effective plan is what can “help a small-business owner prioritize how to spend their time and money, and set measurable goals.”
“A business plan also may help a new business owner obtain business financing,” he said. “For example, for an SBA loan and some larger business loans and lines of credit, lenders may require a formal written business plan before extending credit.”
James Sills, CEO of M&F Bank in Durham, said the first step is understanding entrepreneurship – which is not a good fit for everyone.
“Perhaps most importantly, entrepreneurship involves risk,” Sills said. “Take time to consider whether or not your lifestyle is suited for the requirements of being an entrepreneur before you make the leap.” Next, find people who can be a resource – including a mentor “who is a good fit for your specific business type and industry,” Sills said.
Brian Reid, Triangle president at TowneBank (Nasdaq: TOWNE), advises to “raise more initial capital than you think you need,” and to build your team with experienced professionals.
“As you grow, be careful not to tie your business to just one or two clients,” he said. “Diversify.”
Mark Carlton, president of the eastern North Carolina region at Pinnacle (Nasdaq: PNFP), advises to “take advantage of the small business incubators and entrepreneurial organizations in our community.”
Leon Chisolm III with JPMorgan Chase
mehmet demirci
Leon Chisolm, Eastern North Carolina market executive middle market banking at JPMorgan Chase (NYSE: JPM), said it’s important to develop a strong relationship with a banker early on “so that you can be ready to take the next step in your business and plan for your growth before it happens.
He also advises to “constantly evaluate whether you have the right knowledge and resources within your business or look at external resources to achieve your growth goals.”
“Having a banking partner that can grow with you as your needs change through all stages of growth,” Chisholm said. “Imagine a house where you had to replace the plumbing every time your family grew or changed. It’s a distraction and can be costly.”
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