Immediately, upon choosing to start any new venture, you are faced with an overwhelming amount of choices. These choices will range from choosing your CPA to choosing different types of insurance. Each and every one of these choices you are faced with will impact how successful your business is at building strong business credit and obtaining financing. With the right mentors on your side, the business will be able to grow, profit, and operate independently.
In some instances, the choice is clear-cut; but other situations will become more intricate with various outcomes. No matter if the choice is easy or hard, you are ahead of the curve for identifying the choices. Invest the time to find the answer best suited for your business.
DEFINITION OF “SMALL” BUSINESS
A small business can be as small as one person, or as large as a grocery store. It is a very wide definition. For example, Dan is a professional photographer. He has established an LLC to do business and enjoys traveling to many destinations throughout the year to work on photo shoots for clients. By forming a corporation, any professional can become a one-person business. In Dan’s case, this enables him to deduct from his taxes any and all expenses for equipment, travel, hiring extra help, or renting a studio/office.
Other small business owners—like the corner-store owner—rely on a handful of employees to fulfill the basic tasks of the business. This frees him or her up to do the more top-level work, such as managing the accounts/receivables, obtaining business financing, and keeping the business current on all of its fiduciary obligations. Many owners of businesses have challenges in time constraints, employee theft, and missed shifts.
DIVE IN HEADFIRST
One of the most successful business owners in the history of business, Bill Gates, started Microsoft with several friends.
Every successful business person was once a first-time entrepreneur. They raised a little bit of money, got in on their machinery and worked day and night. They often came out of “work mode” only to eat and shower. There is no reason why, with motivation and proper dedication, anyone at any age can’t start and run a successful business. There is no better way to learn about the world of business than to dive in headfirst.
There are, however, great risks involved. For Mr. Gates, a lot of time was spent on research. Money is spent along with that time, with little hope of it being paid back. Mr. Gates and friends believed in the idea and worked day and night to make it happen. They didn’t rush to the bank first—they carefully evaluated their possibilities. Don’t rush to your bank for financing without exploring other avenues. At times an additional partner may be needed to review the validation of the numbers and a portion of the risk to be reduced. In other situations that may not be the case; however, one thing remains constant—the decision should not be taken lightly, for the immediate answer may not be the right one for the future of your business.
Traditional financing avenues are not your only choice for financing a business, and knowledge of alternative financing can prove an invaluable tool for the small business owner. Interest rates on alternative financing are higher than what banks charge in most cases. However, alternative financing often takes into account factors such as the quality of your collateral and projections rather than a business’s track record.