The Primary Cause Of Business
Financing Frustration |
By Brent Finlay |
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Finding proper business financing is not easy at the best of times
for most small and medium sized business owners and managers.
There are a number of reasons that collectively explain why the
business financing market can be so difficult to understand and
navigate.
But probably the single biggest reason is the
lack of useful information about how the business financing
market actually works.
Business financing information and
education sources predominantly come in two forms: 1) Text
books; 2) Major bank advertising.
If you've ever read
through a educational finance text book or taken a business
financing course, you already know how difficult it can be to
apply the theories, principles, and strategies to a small or
medium sized business.
Our formal education system
provides limited information as to how the market place works,
how to plan for financing requirements, how to manage periods of
growth, decline, transition, start up, etc.
Sure academic
books and courses can go through all these areas in great
detail, but is the information practical, real world, something
you can relate to and apply yourself as a manager or owner of a
small or medium sized business?
In most cases, the answer
is a resounding NO.
Most finance text books speak to big
business financing dynamics that are not easily transferable to
small and medium sized business scenarios.
Outside of the
formal education system, the next great source of business
financing information is the information provided by the major
banks, which they tend to make available to you by the boat load
through their broad based marketing campaigns.
Unfortunately, the information by itself seldom helps you
determine if a particular institution would be able to provide
you with financing, or what would be required to qualify for a
loan.
The good news is that business financing sources
continue to grow in numbers as more and more lenders carve out a
particular piece of the market to service.
In order to
take advantage of these alternatives, you need to have a solid
approach in place when seeking business financing.
Here's
a short list of things to consider
>>> Develop a solid,
ongoing, understanding of both your personal and business
assets, income, and cash flow.
Regardless of the business
financing model, these elements will always come into play to
some degree.
Being able to demonstrate a solid
understanding of your business financials is also an indication
of your ability to manage the underlying business.
>>>
Monitor and manage your personal and business credit.
Small and medium sized business financing is focused on both
personal and business credit histories.
Regular reviews
of both personal and business credit reports from the major
credit reporting agencies are important to avoid errors and
credit practices that can severely damage your borrowing power.
>>> Develop your marketing position.
Yes, seeking
business financing is a marketing exercise.
When applying
for business financing, you're marketing your business to
lending sources and they in turn are marketing their business
financing programs to you.
Think of the lender as a
customer to better understand what they're looking for. Then,
develop a business proposal that addresses all their potential
needs and concerns.
>>> Research Lending Sources
There are lots of business financing sources. But there is also
lots of variation in the types of business applications each one
is prepared to consider.
Broad based lenders rely on
credit history and net worth. As you get more specific in terms
of financing application and industry, lender programs become
more narrow and can be harder to locate.
You need to
consider things like industry, sector, and geography when
looking for business financing sources.
Financing
consultants and business loan brokers can be an excellent source
of information to aid you in this process.
>>> Qualify
The Lender
Before you make a formal application, find out
if the lender has the programs and lending track record to meet
your specific needs.
Too often, the lender is doing all
the qualifying.
>>> Compare your options
Depending
on the scenario, there can be several financing strategies that
could work for your business.
Make sure you take the time
to compare before making a decision. The extra time spent could
save you considerable time and money in the long run.
>>>
Start Today
Regardless of what your business financing
needs are right now, you should regularly invest time staying on
top of your business financials, monitoring your credit, and
researching financing sources that fit your industry and
potential future requirements.
When the time comes to
acquire capital, your proactive efforts can make all the
difference in getting the capital you need with terms and timing
that are acceptable to your business. |
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