Running a business in Colorado is different than many other states as its business climate is tied to its unique geography, weather, and economic cycles. Known for its natural resources such as farming, ranching, and mining, as well as a seasonal tourism industry, the state also features advanced manufacturing in the aerospace and technology sectors.
Banking with someone your own size gives you a business partner who understands the state’s economy and can provide local insights that pertain to your business. Generic business advice might suggest “cutting costs,” but you can’t really “cut” your way to building business wealth in Colorado. It has to be built strategically by leveraging community supply chains, and local assets.
As one of the best banks for small businesses in northern Colorado, we offer these small business strategies to improve profitability because we want all our local business partners to succeed.
Strategy 1: Master The Seasonality Cash Flow
Colorado’s agriculture, tourism, and recreational sectors are highly cyclical, with some businesses making most of their profits over a couple of months — yet during slow periods they still have bills and payroll to cover. Start by analyzing your cash flow and all your financial data to determine your seasonal income and expenses and how they fluctuate throughout the year. Doing this can help you identify potential gaps when your costs exceed your income.
Consider using off-season investing to make the most of your cash reserves during your peak income months, by setting funds aside to cover your operating costs during the leaner periods. You could also use your peak income periods to prepay vendors and make any equipment upgrades during slower months, as either approach could help you get a discount. The idea here is to actively manage your cash flow to improve your profitability and get you through the dry spells.
A business line of credit could serve as a reserve fund that you could access as needed, to cover any seasonal gaps. Many of PWCB business customers maintain a line of credit as a source of emergency capital to cover revenue shortfalls, as it offers much lower interest rates than a business credit card. A line of credit also benefits your business because you can access it without waiting for a business loan approval.
Strategy 2: The “Colorado Supply Chain” Multiplier
Take a close look at your supply chain and consider sourcing your materials and services as locally as possible to reduce risks and shipping costs. Many businesses face uncertainties from trade frictions that could unexpectedly increase their costs, and no one will forget the supply disruptions that happened during the coronavirus pandemic. Switching to Colorado-based vendors where possible can reduce these risks. Of course, you’ll have to consider the price difference if local sourcing costs are higher. Just keep in mind that spending your money as locally as possible is better for the state and our community.
Strategy 3: Leverage Hidden CO Tax Credits and Grants
Many businesses in our state are missing out on tax credits and grants that could help them with loans, investment capital, and their bottom line. Profitability isn’t just about making more sales; it also means utilizing state incentives as a source of capital and reducing your tax burden.
The Advanced Industry Investment Tax Credit (AITC) offers a tax credit for individuals in Colorado who invest in a Colorado business that’s certified as an advanced industry business. Investors can earn a tax credit of 25% of their investment with a maximum credit of $100,000 on an investment of $10,000 or more.
The Cash Collateral Support program helps small and medium-sized businesses in Colorado that lack the collateral to secure a traditional business loan, by offering a cash deposit that a business can use to obtain credit. The program is intended to support employee-owned businesses and those transitioning to employee ownership.
The Colorado Enterprise Zone (EZ) Program encourages development in 16 designated enterprise zones in economically distressed rural areas. Businesses can receive state income tax credits, sales tax credits, and use tax exemptions for specific business investments. Taxpayers who contribute to enterprise zone projects may earn state income tax credits.
The Rural Jump-Start Program offers 100% relief from state and local income, sales, use, and property taxes to incentivize businesses to start or move to rural, economically distressed counties.
The Skill Advance Colorado Job Training Grant (formerly known as the Colorado First and Existing Industry Grant) helps businesses and nonprofits create customized job training for newly hired employees at businesses relocating to or expanding in Colorado.
The Venture Capital Authority (VCA) provides seed and early-stage startup capital of $50,000 to $1 million. Businesses must have strong growth potential, have their headquarters and main business operations in Colorado, meet the Small Business Administration’s definition of a small business, and be seeking their first investment from a professionally managed venture capital firm.
The Job Growth Incentive Tax Credit provides a state income tax credit equal to 50% of a business’s FICA contributions for each new job for businesses considering an expansion in or relocation to Colorado. The credit is good for up to eight years. The Strategic Fund Job Growth Incentive offers cash incentives of up to $6,500 for each new job created by businesses expanding in or relocating to Colorado. This incentive is good for up to five years.
Strategy 4: Real Estate in a High-Appreciation Market
Colorado real estate has historically seen strong appreciation, and businesses that don’t own their own location are essentially paying someone else’s mortgage. Businesses that plan to stay in business for at least five years could benefit from an Owner-Occupied Commercial Real Estate (OOCRE) loan.
These loans can be used to buy, build, or refinance a property when a business uses at least 51% of the available space. These are available through traditional bank loans and are backed by the Small Business Administration (SBA) for small businesses and startups.
Regardless of which type of business loan you need, working with a local community bank, such as PWCB, can be a tremendous asset. We offer commercial real estate financing for business owners in Colorado as a community bank that understands the local real estate market better than our larger competitors. We make all our lending decisions locally and are interested in seeing our local business partners succeed.
Our two most popular local business loans in Colorado are SBA 7(a) loans and 504 loans. A 7(a) loan requires borrowers to provide collateral. With 504 loans, the equipment being purchased through the loan is used as collateral.
SBA 7(a) Loans
A 7(a) loan can be used to provide up to $5 million for working capital, buying equipment, or buying an existing farm or business. Fixed and variable interest rates are available, in terms of up to 10 years, or longer for something that has a useful life of 10 years or more. When used to buy real estate or improve a property, terms can be for up to 25 years.
SBA 504 Loans
A 504 loan can be used for something with a useful life of 10 years or more. This includes equipment, land, and business properties. They can also be used to improve or modernize business property, with a loan covering up to 90% of the cost.
Strategy 5: Protect Your Business with Cybersecurity as Asset Protection
Small businesses are three times more likely to be targeted by cybercriminals than larger companies, according to the Cybersecurity & Infrastructure Security Agency (CISA). This means it’s only a matter of time before cybercriminals target your business, if they haven’t already. Investing in cybersecurity serves as wealth protection for your business, as just one incident could wipe out years of profits. This requires implementing strict cybersecurity protocols and training for your employees. On the banking side, services such as Positive Pay and requiring two authorizations for payments and transfers can help reduce your chance of fraud. With Positive Pay, you give us a list of all the checks and ACH payments your business makes. If we receive a request for payment that doesn’t match your list, we’ll flag it for your review.
Partner with Us for All Your Colorado Business Banking Needs
Growing your business wealth requires a mix of smart operations, local knowledge, and asset ownership. By partnering with PWCB, you receive our knowledge of the local economy and business resources, and we’ll do all we can to help you succeed.
Ready to bank with someone your own size? Businesses looking to leverage these profit improvement strategies, our team is ready to help. Stop by your local PWCB branch or contact us at 833-226-7474.