Small Business Basics
Entrepreneurs/Risk Takers
Those of us that supply money to small and medium size businesses are working with the back bone of American enterprise. There are more than six million small/medium size businesses in the U.S. And they are led by Entrepreneurs! The Risk Takers! An entrepreneur is someone who sets up and finances new commercial enterprises to make a profit. Webster's New World Dictionary says he's "assuming the risk for the sake of the profit." The Oxford Dictionary describes him as a "person who takes financial risks in the hope of profit."
Let's look at the profile of a small business person
He's invested his life savings in a dream. He's good at something and has chosen to make a business of it. He may have borrowed from family members or gotten a 2nd mortgage to start the business. The business is the primary or sole support of the owner and his family.
Are You Sure You Want a Business?
What's the pitfall in all this? There is nothing in any of the above that says the business owner has been taught to run a business!There are actually two sides to running a business. Although it should be obvious, the fact is few business owners understand this concept. First there is the practical/functional side of the business, often called the "Operations." Another way of expressing it is What you do and How you do it! For example: The business owner can be a hair stylist with her own salon. She does great work -- cutting hair, tinting, permanents, etc. But in a year or so she's either still struggling financially or going out of business. Or he's an air conditioning expert. He knows precisely what A/C unit is just right for your home or office. He knows how to install it, service it, and can repair anything that might go wrong. But here also, a year or more into the business and he's either got a marginal business at best or is simply going out of business. Why? What do these two businesses have in common? Both owners are terrific at what they do! What they have in common is the fact that neither knows how to run a business. And both are very much unprepared to deal with the financial issues. They don't understand how to handle receivables, payables, pricing, inventory control, credit issues, advertising budgets, recruiting/training/retaining/compensating employees, deficiencies in working capital, and many more factors.
The consulting industry tells us there are Five Pillars in any business, large or small, whether it is well run or not. These are Management, Operations, Cost Controls, Finance, and Marketing. If one or two is weak, the business will either not be as profitable as it ought to be or will eventually fail! Over 90% of business owners are unaware of this fundamental truth.
Some years ago the University of South Carolina published "10 Reasons Businesses Fail." Eight of them have to do with Money!
When Money Will Help Your Business
So, what's a small/medium size business owner to do if he needs money for any of many bona fide, legitimate purposes, such as:| Buying Inventory | Emergency Expenses |
| Paying Taxes | Paying Overdue Bills |
| Advertising Campaign | Adding Space |
| New Location | Purchasing Equipment |
| New SignageRemodeling/Renovation |
You can be almost guaranteed that the bank will decline a commercial loan application -- that's what they do 92% of the time. In fact, most banks won't even accept a commercial loan application if the business is less than 2-3 years old, the owner has less than perfect credit, or unless substantial collateral is offered. Are the banks heartless? Unfeeling, unkind? No! Remember, a loan is something that has to be paid back, usually with interest. As we all know, banks are not charities! The track record of small and medium size businesses is unfortunately terrible! 8 out of 10 businesses fail in the first five years!
If you were the bank, and needed to protect the bank's solvency as well as make profitable loans, you likewise would be forced to decline the overwhelming majority of loan applications. If the doors to loans are closed to the business owner, what can he do?
New, Alternative Source for Money!
A few years ago a new alternative system of funding came on the horizon. There is now an opportunity for businesses to receive financing that until recently were denied funding. If you are interested in learning what may be available to you and your business, contact our office for details. We do require that you accept MasterCard and Visa and prefer you be in business at least a year, although we will accept exceptions. There is no cost to apply! And we can approve approximately 85% of all applicants!--instead of denying 92% as the banks will! We will review your ROI (Return On Investment) to assure it will be in your interest to get funding. Money in the range of $2,500-$150,000 per business location can generally be made available in about 2 weeks!