Financing Tips for Small Biz Entrepreneurs
Financing Tips for Small Biz Entrepreneurs
Pre-start-ups and Start-ups:
Getting money from an institution, such as a bank, at a very early stage is a nearly impossible task. Some types of businesses may qualify for SBA loans or even government grants (you do not have to pay these back), especially if they are minority/women owned. For these situations they are a possible source of seed funding.
Grants have tough approval criteria and often will top out at around $50,000. Check with your state government or a federal government website like http://www.grants.gov to see if you qualify. There are usually very stringent rules to qualify and the process can get lengthy. A third party lender may be a more accessible solution than a traditional bank or grant program but you will be required to put up significant personal collateral in either case. Equity in real estate is usually what the lender desires in this situation.
Without a doubt, you should have a business plan in place for yourself. Your written plan will also prove useful in obtaining a loan or a government grant. Appearing organized and calculated is always desirable when seeking funding.
If by choice or necessity you may need to be prepared to bootstrap your way through the first few years. This means possibly working from your home and having employees work out of virtual offices if possible. Some of the biggest companies out there like Hewlett-Packard and Apple started this way. With the technological world we live in, many types of businesses can work like this forever and nobody would know it.
Bootstrapping will also entail self-financing through savings, home equity and/or credit cards. Although they may be necessary, be very careful with all of these avenues. If equipment is an issue, a good credit score and collateral will get some sort of financing even for a start-up.
For those with especially sexy business plans, such as something in the technology, health science or environmental sectors, it is possible to get in front of Angel investors, VC’s and Universities to obtain seed money without a working company. This is very rare but with the right concept and management team already in place, a solid plan can get funded.
Don’t forget that the fastest place to find funding, besides your own money, is family, friends and vendors to your company. Just be careful in laying out the terms of the loans and credit to stay in control of the company and use of the advance or funding. Family and friends can be very difficult to deal with as partners or lenders.
Businesses with 2+ years in service:
After 2 to 3 years in business, you now have a shot at getting institutionally financed. Again, a business plan is a must as well as a solid personal credit history. As long as you are a legal business entity, you will see an influx of company credit card and loan opportunities. Establishing a line of credit with your bank or a reasonable rate credit card as soon as possible is a good idea.
It is always easier to get money when you don’t need it, so get it when you can in the form of credit. This way you don’t pay for anything you don’t use and it will be there when you need it. The highest credit limit usually available that is based solely on the company financials and your credit score, with no collateral, is $100,000.
At this point taking losses on your books for tax purposes should be reversed unless you feel you own a company that will never need outside money. I run up against people on a regular basis that need a loan or a line for whatever reason and they are doing ok or even very well but they can’t prove it to a bank. Your books backed up by your tax records are your only proof, so make good business decisions if you have a company that will need any type of financing including equipment leasing.
By the way, showing a loss or even a small profit trend will make a company very difficult to sell, with the possible exception of a cash-type business, such as a retail establishment.
Financial institutions are going to look at your personal credit, company and personal collateral, profit & loss, balance sheet and debt-to-equity ratios to determine if you can make your payment on a regular basis and cover it if something goes wrong. Be prepared to say “yes” if they want your house as collateral or you will not get much consideration.
If you aren’t willing to put up personal property it is a red flag. That says you are not confident in your ability to pay back the loan and therefore the lender will have no confidence either.
If you want equity funding with investors, the books should be clean too and the management team needs to be top notch. You should also be willing to lose a significant portion of the company shares to these investors and possibly lose a lot of operational control.
Parting points:
No matter how long you have been around, rest assured that you will be required to sign personally for any financing. You will have to personally guarantee money for you or your company. In rare cases, there are avenues around this requirement, but they come with a cost.
When you have the need for money, do your homework as to how much you really need and have all of your reasons for needing the money lined up. Just throwing out a number to a lender puts up the first red flag that you are not a good business person and may not use the money wisely or pay it back.
Also keep in mind that many institutions will require that some monies be used to pay off other debts to keep your ratios within limits and they will require that you use them as your primary bank. When other debts need to be paid, you should know that the lenders will pay them off for you and give you the remaining money in order to protect their interests in the deal.
Again, do your homework on why you need the money and how much you need. No lender is going to give you a large sum of money and let you pull a fast one on how it is used. So don’t even think you can try something like getting a debt consolidation loan and then using it to buy property. It won’t happen and it is fraud.
Keep in mind that a good relationship with your business banker is a must for any business owner. That relationship can make the difference in rules being bent or deficiencies being overlooked and it will avoid the hassle of changing banks because you had to go elsewhere to get a loan.
A relationship with other leasing and financing brokers is also important since they hold the key to many avenues of financing. They have established relationships with lenders and can offer funding vehicles you may not be familiar with.
Financing Tips for Small Biz Entrepreneurs - To learn more about this author, visit George J Sierchio's Website.
Like this article? Share it with your friends
From start-ups to 20 year old companies, I am asked everyday to help people find financing for their companies. The answer is usually a function of the type of business, the time in business, the financial status of owners/business and what is needed to be accomplished with the money. I would like to lay out some basic guidelines and considerations when funding is needed. You will see that time in business has a big impact.
Pre-start-ups and Start-ups:
Getting money from an institution, such as a bank, at a very early stage is a nearly impossible task. Some types of businesses may qualify for SBA loans or even government grants (you do not have to pay these back), especially if they are minority/women owned. For these situations they are a possible source of seed funding.
Grants have tough approval criteria and often will top out at around $50,000. Check with your state government or a federal government website like http://www.grants.gov to see if you qualify. There are usually very stringent rules to qualify and the process can get lengthy. A third party lender may be a more accessible solution than a traditional bank or grant program but you will be required to put up significant personal collateral in either case. Equity in real estate is usually what the lender desires in this situation.
Without a doubt, you should have a business plan in place for yourself. Your written plan will also prove useful in obtaining a loan or a government grant. Appearing organized and calculated is always desirable when seeking funding.
If by choice or necessity you may need to be prepared to bootstrap your way through the first few years. This means possibly working from your home and having employees work out of virtual offices if possible. Some of the biggest companies out there like Hewlett-Packard and Apple started this way. With the technological world we live in, many types of businesses can work like this forever and nobody would know it.
Bootstrapping will also entail self-financing through savings, home equity and/or credit cards. Although they may be necessary, be very careful with all of these avenues. If equipment is an issue, a good credit score and collateral will get some sort of financing even for a start-up.
For those with especially sexy business plans, such as something in the technology, health science or environmental sectors, it is possible to get in front of Angel investors, VC’s and Universities to obtain seed money without a working company. This is very rare but with the right concept and management team already in place, a solid plan can get funded.
Don’t forget that the fastest place to find funding, besides your own money, is family, friends and vendors to your company. Just be careful in laying out the terms of the loans and credit to stay in control of the company and use of the advance or funding. Family and friends can be very difficult to deal with as partners or lenders.
Businesses with 2+ years in service:
After 2 to 3 years in business, you now have a shot at getting institutionally financed. Again, a business plan is a must as well as a solid personal credit history. As long as you are a legal business entity, you will see an influx of company credit card and loan opportunities. Establishing a line of credit with your bank or a reasonable rate credit card as soon as possible is a good idea.
It is always easier to get money when you don’t need it, so get it when you can in the form of credit. This way you don’t pay for anything you don’t use and it will be there when you need it. The highest credit limit usually available that is based solely on the company financials and your credit score, with no collateral, is $100,000.
At this point taking losses on your books for tax purposes should be reversed unless you feel you own a company that will never need outside money. I run up against people on a regular basis that need a loan or a line for whatever reason and they are doing ok or even very well but they can’t prove it to a bank. Your books backed up by your tax records are your only proof, so make good business decisions if you have a company that will need any type of financing including equipment leasing.
By the way, showing a loss or even a small profit trend will make a company very difficult to sell, with the possible exception of a cash-type business, such as a retail establishment.
Financial institutions are going to look at your personal credit, company and personal collateral, profit & loss, balance sheet and debt-to-equity ratios to determine if you can make your payment on a regular basis and cover it if something goes wrong. Be prepared to say “yes” if they want your house as collateral or you will not get much consideration.
If you aren’t willing to put up personal property it is a red flag. That says you are not confident in your ability to pay back the loan and therefore the lender will have no confidence either.
If you want equity funding with investors, the books should be clean too and the management team needs to be top notch. You should also be willing to lose a significant portion of the company shares to these investors and possibly lose a lot of operational control.
Parting points:
No matter how long you have been around, rest assured that you will be required to sign personally for any financing. You will have to personally guarantee money for you or your company. In rare cases, there are avenues around this requirement, but they come with a cost.
When you have the need for money, do your homework as to how much you really need and have all of your reasons for needing the money lined up. Just throwing out a number to a lender puts up the first red flag that you are not a good business person and may not use the money wisely or pay it back.
Also keep in mind that many institutions will require that some monies be used to pay off other debts to keep your ratios within limits and they will require that you use them as your primary bank. When other debts need to be paid, you should know that the lenders will pay them off for you and give you the remaining money in order to protect their interests in the deal.
Again, do your homework on why you need the money and how much you need. No lender is going to give you a large sum of money and let you pull a fast one on how it is used. So don’t even think you can try something like getting a debt consolidation loan and then using it to buy property. It won’t happen and it is fraud.
Keep in mind that a good relationship with your business banker is a must for any business owner. That relationship can make the difference in rules being bent or deficiencies being overlooked and it will avoid the hassle of changing banks because you had to go elsewhere to get a loan.
A relationship with other leasing and financing brokers is also important since they hold the key to many avenues of financing. They have established relationships with lenders and can offer funding vehicles you may not be familiar with.
Financing Tips for Small Biz Entrepreneurs - To learn more about this author, visit George J Sierchio's Website.
Like this article? Share it with your friends
 | |
 |
No article feedback found. |
| |
Leave Your Feedback |
 | |
| |||
Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
|||
George LudwigGeorge Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
|||
John AlexanderJohn has taught keyword research and SEO skills to small groups of business owners and Webmasters from over 80 different countries world wide since 2002. John is also the Director of Search Engine Academy ; Co-director of Training at Search Engine Workshops offering live, SEO Workshops with his partner SEO educator Robin Nobles, author of the very first comprehensive online search engine marketing courses at SEO Training Online and the SEO Workshop Resource Center. I look forward to hearing from you! - Visit John Alexander's Website |
|||
Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
|||
John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
|  |
Subscribe to George's articles
 |
|
Buy a Business and Run It Successfully - If you have made the decision to purchase a business, your goal should be to buy a business and run it successfully. This blog will provide you with tips and insights in achieving this life changing goal.
|
|
|
 |
 |
|
George J Sierchio Video - George J Sierchio - There are a few reliable sources of finding businesses for sale. There are also some awful sources. Take a look at my tips on how to best find a business to buy.
|
|
|
 | |||||||
|
 | ||
 |
||
 |
||
 |
||
|
| ||
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"
Click Here To Learn More |
|
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 Fitness Sales Success Funding Worksheet The Human Network Business Success By Design Mirror Marketing |
|
 | ||
 |
Top 50 Marketing Blogs
Top Blogs To Watch In 2008 | |
 |
Write The PR
Press Release Builder | |
| ||
 | ||||
| ||||
|
| ||||
| ||||
|
|
|
|
|
||||||||||||
|
Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
|
|
|
| ||||||||||||
| ||||||||||||
|
|
||||||||||||