austin business finance

austin business finance

The Role of Business Finance in Austin: Strategies for Success

1. Introduction to Business Finance

No matter what position a company holds in the economic continuum, a reliance on external financing needs is a constant. As part of Washington Mutual’s Business and Community Development (WMB) group, the mission of the Business Finance Center is to promote business growth, job creation, and shared economic prosperity by increasing access to capital and financing opportunities for businesses of all types and sizes. It is with these goals in mind that the Business Finance Center staff has developed the subheads below. The Business Finance Center delivers community development outreach and economic development initiatives in partnership with a variety of collaborators and funders. In addition to providing technical assistance in the form of suggestions for refinements to business information tools for credit analysts, the Business Finance Center is also responsible for economic forecasting and identifying and communicating about economic and financial risks.

We believe that a vibrant business finance community will be an essential contributor to white-collar job growth and an expansion of economic opportunity in Austin in the coming years. Our major educational and economic development investments have been successful if companies born in Austin and companies relocating to Austin can access the financial resources required to grow and succeed in our city. For this reason, the Austin Business District Partnership is launching and staffing a Business Finance Initiative. This new program is designed to increase dialogue among stakeholders in the business finance community, preserve and expand the supply of business credit and venture capital, demand accountability from capital providers, match dealmakers with opportunity, and monitor and report on trends in the business finance community.

2. Key Financial Concepts for Austin Businesses

Two key factors for business success are acquiring sufficient capital and thoroughly understanding the basic financial requirements to manage a business effectively. To succeed, every business owner or manager must have a basic understanding of key financial concepts. Since the availability of capital depends on how well a business manages its financial affairs, a basic understanding of these key financial concepts is of vital importance to all businesses.

Key Financial Concepts for Austin Businesses

Opening a business requires capital to cover initial expenses and provide operating funds until the company can become self-sustaining. The form and amount of business financing will depend on the needs of the business and may come from a combination of sources. In addition to capital availability, a thorough understanding of the basic principles of finance is critical for a business to be successful. These basic principles include the time value of money, accounting and financial statements, working capital, purchasing strategies and inventory, assessing business profits, and plant and equipment acquisition.

3. Financial Management Strategies for Austin Companies

Before we offer various tactics to produce financial success, it is first necessary to define what we mean by financial management strategies. In effect, these are detailed plans or proposals of how the company will manage its resources and achieve long-term objectives. The intent is to help the company in its business, freeing it from financial uncertainty caused by ill-timed decisions. Cross-functional teams representing all segments of the company and industrial relations programs should be involved in crafting these strategies. Revenue, expense, asset, liability, and equity forecasts will each have an impact on these strategies, so actual snapshots will prove beneficial. But in all situations, the key players in the various areas of finance will have the burden of developing and implementing these plans. Their extended team will include bank and bond sales forces, legal counsel, and public accounting personnel.

Defining the financial management strategies of companies in Austin is a complex task. First, our local economy encompasses a variety of organizations – corporate headquarters, divisional, and other operations of both U.S. and foreign companies. Second, of the more than twenty-five major industry groupings locally, there are very few where a large concentration of players exists. At best, we can identify certain sub-groupings to use as examples. Yet, a broad set of tenets for financial success applies to all.

4. Investment and Funding Opportunities in the Austin Business Ecosystem

In addition to supportive funding strategies, specific and varied kinds of investments can also help Austin’s business ecosystem to continue growing and producing good jobs. Incentive funding may be used selectively to promote investment in underserved neighborhoods and to correct for market failures that discourage new companies and longer-standing businesses from investing in their properties so they can meet growing demand. Economic development programs could set aside some portion of their funding for small businesses that provide critical goods or services needed by other small businesses unable to withstand the effects of rising rents. Finally, support for small businesses through forgivable loans or tax credits can help them cultivate mentoring relationships, hire and train staff, and protect against sudden financial losses that could deter investment. Like all companies, small businesses need the flexibility to invest when they see opportunities that fit their missions and goals. All of the investment and funding opportunities proposed in this policy brief aim to give greater flexibility to small business owners who are making investment decisions and to people who know their own neighborhoods very well.

5. Conclusion and Future Trends in Business Finance in Austin

Fifteen years ago, when the Austin business community identified business finance as a critical economic development issue, several area banks and the state created development finance programs. With the recent surge of growth and technological change in Austin, it is once again time to renew and refocus our commitment to business finance. The entire future of our area’s industrial structure cannot be expected to be developed out of existing firms and through internal investment processes. Should Austin fall behind in implementing a business finance strategy, that future may never be realized.

In all, we believe that the strategies advocated in this report move toward a more stable, diversified, and adaptable economy in the Austin area. Our recommendations provide choices for economic decision-making entities in Austin. We are not recommending that the strategies be pursued by any particular public or private organization. Rather, we commend the recommendations to the City’s Economic Development Department, the Chamber of Commerce, the Greater Austin Economic Development Corporation, and all other organizations charged with making and implementing long-term strategic decisions about the economic development of the greater Austin area. Our hope is that the strategies proposed in this report will catalyze discussion where rational, thoughtful individuals can open the economic development process to broad public dialogue, assuring that our future economic environment reflects not only the entrepreneurial energies of the business community but the collective values and ambitions of the citizenry at large.