Many small business owners and entrepreneurs don’t have a financial background and aren’t quite sure the best way to manage their business finances. That’s where a financial advisor comes in. A financial advisor can offer advice that puts you in control of your small business’s finances. Also, getting financial advisor help with business loans before you apply can increase your chances of success and help you find the best choice for your business. 

Learn what a financial advisor is, when to hire one, how they can help with financing, and how to find the right advisor for your business in this article from Nav’s experts.

What Is a Financial Advisor?

A financial advisor offers expert guidance on many aspects of running your business. They can:

• Give you financial advice before getting a business loan
• Advise you on how to manage your business’s cash flow
• Help your business stay compliant with taxes
• Explore financing options with you
• Prepare financial statements
• Analyze your profits and losses

An advisor can also help with personal finances and ensure you aren’t overpaying yourself or saving too little for retirement. 

The financial side of running a business is a clear stressor for many small business owners, especially during an economic downturn. According to a survey conducted by MainStreet.org, the two biggest concerns that small business owners face today are shrinking profit margins and inflation. These worries are listed before supply chain bottlenecks or maintaining the current customer base. 

This is where financial planning comes in. Most small business owners don’t have a financial background, so using a financial advisor can relieve the pressure. The advisor can guide you toward making sound business decisions and reaching your financial goals. 

How Do You Determine if You Need a Financial Advisor?

According to NFIB, small businesses in the U.S. are 30% more likely to succeed today than in the 1970s. This great news is accompanied by the fact that, if a business does fail, it’s most often because of a lack of cash flow management. If you don’t feel like you have a full grasp of your business’s cash flow, a business financial advisor can be the perfect resource to increase your understanding and control of your cash flow. (And be sure to use Nav’s Cash Flow Tool to get started with cash flow management.)

There are many other ways a financial advisor can give you better control over your business’s finances. Exactly how you’ll use a financial advisor depends on what your business needs and the stage you’re in. But any small business — from those in the startup phase to the established institution — can benefit from working with a business financial advisor. 

A new business can get advice on which business formation service to use or how to set up a functional bookkeeping or budgeting strategy. Financial advisors can help to get the right foundation in place from the beginning to keep your business’s financial situation positive and growing (and make filing tax returns much simpler). 

On the other hand, businesses that have been around for a while may need help adding the right financing to their portfolio, updating their business plan, or completing succession planning if they want to pass on the business to someone else. 

Is It Hard to Get a Small Business Loan?

It can be challenging to get a small business loan, but a small business advisor can advise you on what kind of loan is best for your situation. Eligibility depends on many factors, like the lender requirements, the type of loan, your credit score, your time in business, and your annual revenue. A financial advisor for a business loan can help.

There are many kinds of small business loans you can apply for, like:

• Term loans
• Bank loans
• Lines of credit
• Microloans
• Small Business Administration (SBA) loans
• Equipment financing
• Invoice financing
• Commercial real estate financing

SBA loans are notoriously difficult to apply for and qualify for. The loan application process is typically very long, the requirements are usually high, and it often takes a long time to receive funding. On the other hand, online lenders have quick, fully digital applications and you can get funding as soon as the same day. Financial advisors can help you determine the kind of loan that fits your needs. If you do qualify, the interest rates and repayment terms you’ll be offered may depend on factors like your personal credit score, your business credit score, and the loan amounts you borrow. Learn how to establish business credit in this guide from Nav.

You can also find personalized financing options based on your business’s data with Nav. See your loan options from Nav’s 160+ partner choices.

What Are the Advantages of Using a Financial Advisor?

There are many benefits of working with a financial advisor, including boosting your chances of success as a small business owner in general. The biggest perks to using a financial advisor are:

• Understanding your business’s cash flow
• Increasing working capital
• Discovering the right financial products
• Meeting your business’s financial goals
• Getting retirement planning
• Feeling more confident and in control of your business

While you may be able to teach yourself what you need to know to run a business, a financial advisor can help you save time and money by bringing the expertise to you. Additionally, they can help with market research to evaluate trends in your industry to help you remain competitive.

What Are the Fees for Financial Advisors?

Financial advice comes at a cost. A financial professional will usually either charge a flat rate (which is preferred) or will work on commission. Working on commission can create conflicts of interest, however, because the advisor may recommend financial products that benefit them in some way. Knowing the cost upfront with a flat rate allows you to budget for it appropriately. 

What Questions Should I Ask My Financial Advisor?

When you’re searching for a financial advisor, you’ll want to do your research and not hire the first one you come across. There are several things you’ll want to find out before you agree to work with them. Here are a few useful questions to ask potential advisors. 

Are you a fiduciary? 

If a financial advisor is a fiduciary, it means that they are legally obligated to hold the clients’ interest first. The financial products a fiduciary advisor recommends must benefit the client before themselves. If the advisor has two financial products to choose from and the first will make the advisor more money but the second is better for the client, they must recommend the second. Using a fiduciary advisor ensures that you always get the best financial advice for your business.

How does your pricing structure work?

You’ll need to know how the advisor charges its clients, whether that’s on commission or a flat fee. A flat fee is preferable since you know upfront what you’ll be paying, and an advisor that charges based on commission may have a conflict of interest. The products the advisor recommends may make them money, so working on commission may encourage them to recommend products that aren’t in your best interest but will bring a profit to the advisor.

What are your qualifications?

Ask the advisor about their background and what qualifications they have to be offering financial advice. It’s a good idea to find out how many years they have been working in the field so you can assess how much experience they have.

Also, check with the Financial Planning Association or the Society of Financial Service Professionals to see if they are active members. This helps to ensure that they are qualified as advisors. 

What is your small business experience?

You want an advisor that can relate to you as a small business owner. Working with someone who is well-versed in the challenges that small businesses face will make the experience easier and more fulfilling. This way, the advisor knows how to guide you on your best path forward and won’t offer advice that’s better suited to larger companies.

Can I speak to referrals?

If you weren’t referred to the financial advisor by friends or family, ask if you can reach out to referrals. Referrals can give you an objective view of what the experience was like working with that advisor and whether or not it was worth the fees.

Are Business Advisors Worth It?

Business advisors are an extremely useful resource for small business owners without an accounting or business background. There are so many things for small business owners to learn and consider when running their business, it’s often a good idea to outsource some of the work to a professional. A business advisor can ease the stress of managing your cash flow and help you make confident decisions while reaching your goals. They can also walk you through the process of applying for the right business loans or business credit cards.