Is Your Business Underfinanced?
Is Your Business Underfinanced?
Join the club.
As we move from an industrial to an information and service society, a new generation of companies is spawning. Entrepreneurs no longer have to buy expensive equipment or inventories to get their businesses started. They rely instead on their intellectual capital.
Two simple examples are software developers and consultants. These entrepreneurs depend more on their own skills, time, and knowledge than any other "fixed" asset.
The good news is that these types of businesses are easy to set up and have minimal associated costs. The bad news is that because you don't have many fixed assets, traditional lending institutions like banks don’t know how to valuate your business.
You can have rapidly growing revenues and still be underfinanced.
In fact, the statistics show that if you are a high growth company, you are more likely to be underfinanced!
Overall, 20.7% of companies are underfinanced. But when you look at companies that have grown their revenues by 20% or more over the past three years, you'll find that 30.8% of them are underfinanced!
It is obvious from this data that it is the young, high performing companies that are currently experiencing the greatest difficulty in obtaining the financing they need to operate their businesses.
Many entrepreneurs are so discouraged that they don't even apply for financing. In 2000, only 60% of small and medium sized companies tried to raise capital. Only 53.8% of businesses with zero to four employees applied for financing.
As a result, in the late 1980's, only 15% of entrepreneurs were concerned over their financial situation. Fast forward to 2002 and that number rises to almost 40%! So why are these numbers so discouraging? Most entrepreneurs only turn to one source of potential capital: Banks.
Join the club.
As we move from an industrial to an information and service society, a new generation of companies is spawning. Entrepreneurs no longer have to buy expensive equipment or inventories to get their businesses started. They rely instead on their intellectual capital.
Two simple examples are software developers and consultants. These entrepreneurs depend more on their own skills, time, and knowledge than any other "fixed" asset.
The good news is that these types of businesses are easy to set up and have minimal associated costs. The bad news is that because you don't have many fixed assets, traditional lending institutions like banks don’t know how to valuate your business.
You can have rapidly growing revenues and still be underfinanced.
In fact, the statistics show that if you are a high growth company, you are more likely to be underfinanced!
Overall, 20.7% of companies are underfinanced. But when you look at companies that have grown their revenues by 20% or more over the past three years, you'll find that 30.8% of them are underfinanced!
It is obvious from this data that it is the young, high performing companies that are currently experiencing the greatest difficulty in obtaining the financing they need to operate their businesses.
Many entrepreneurs are so discouraged that they don't even apply for financing. In 2000, only 60% of small and medium sized companies tried to raise capital. Only 53.8% of businesses with zero to four employees applied for financing.
As a result, in the late 1980's, only 15% of entrepreneurs were concerned over their financial situation. Fast forward to 2002 and that number rises to almost 40%! So why are these numbers so discouraging? Most entrepreneurs only turn to one source of potential capital: Banks.
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For more information, visit www.EvanCarmichael.com. |
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