Tag Archives: business financing
Lenders have many criteria to consider when deciding whether to provide financing for your business operations, and all start with the traditional examination of capacity, capital, credit, collateral, and character. But, make no mistake. Regardless of the other relative strengths you may possess, it all comes down to character.
Lenders have to be assured that prospective borrowers have the ability to perform well enough to generate profits to repay their financing. They will ensure that the borrower has a vested interest in the operation with their own money, and that there is always a secondary source of repayment from which they can ultimately get out of a deal. Read More
Judgment day may be anti-climactic, since a large number of decisions are going to be made in the process; many by the business, many by the lender, and many through compromise. Diligence and purpose must be the focus of your efforts for every decision leading ultimately for the money to run your business.
An important attribute to hold onto through these processes is the perspective of your purpose, and the limitations of your business. It is all about money, but money is still only money.
The process of finding business capital is a sales challenge. You establish needs, find prospects, qualify, and try to close. It is one of dozens of challenges any small business faces every day, but it is not the only one. And solving the money problem does not solely insure success.
Money is the currency in which you operate, but there is a greater challenge in establishing a way to making it flow regularly through your business. Money doesn’t end the list of challenges.
You need to establish some limits as to what your business agree to do, agree not to do, and what it will pay for the financing it is seeking. If your lender asks too much, more than your self-established limit, walk away from the deal.
Remind yourself why you established that limit, and keep looking.
Many lenders have had the unfortunate experience of negotiating loans with a borrower who was using false, exaggerated, or misleading information to obtain credit. Whether or not the ploy succeeded, the effects are often felt by legitimate borrowers, whose applications are scrutinized with even more suspicion due to the experience. While under normal circumstances there is a natural inclination toward trusting people, be prepared to confirm everything.
Unless actual loan losses have been incurred, many lenders may be hesitant to prosecute loan applicants found to have used false information to obtain their loan. But when they do, they may get assistance from the federal government, who insures depositors and regulates banks. Read More
Starting a new business is one of the riskiest, yet exciting decisions you will make in your life. While over sixty percent of the new jobs in the United States are created by small businesses annually, a significant number of them are not sustained due to failure.
There are relatively low barriers to entry for starting up many businesses: adopt a name, maybe incorporate, get a business license and away you go. Dreams and schemes are cheap, but before you get too far down the road, you need to set your sights on reality. Read More
Don’t worry about it, it’s no big deal. Those are famous last words in any business negotiations, particularly coming from a lender to a borrower (or vice versa, to be fair). A savvy borrower who understands the terms that the lender wants in a loan agreement, must be ready to make some hard choices.
Borrowers must try to imagine the worst case scenario in their business ahead and reflect on how the lender’s terms will impact the business. Sometimes there can be ways to give the lender adequate protection without the full- scale surrender that is often described in the loan agreement. Read More
Here’s a question for you: are there degrees of dishonesty?
If no one saw you miss a golf swing in the rough, and you didn’t add it to your score, is that dishonest?
If bad traffic made you late for work, should you lie and say you were on time, so to let your employer bear the cost of your missed time instead of you?
If you serve in the Legislature, and a certain political contribution from a trade association made it much simpler for you to agree with their reasoning, have you sold your vote? Read More
Yes, that is a serious question. And in my reasoning, yes is also the ultimate answer to the question.
Trust me when I assert that I am a committed free-market capitalist. I believe in the power of the profit motive to move mountains, revolutionize the world, and spread assorted good things to millions of people. Without it, we might be still be living as serfs in 18th century conditions under the knuckles of some knight.
Profits motivate ordinary individuals to unleash their imagination, energy, and industry to create opportunities, innovation, and relief. Profits solve problems, feed people, and change the planet. Without profits, the world would collapse on a moribund economy that couldn’t even feed us, resembling the failed communist societies that herded citizens into forced labor in collective, state-owned enterprises, rife with corruption, fraudulent output, and dispirited participants. Read More
Over this past weekend the federal budget drama ended with an hour to spare ahead of a threatened shutdown. Congress passed a continuing resolution to keep funding operations after a deal was cut to reduce the remaining 2011 budget by $38 billion, while taking several social issues off the table demanded by conservatives.
The story was covered like a natural disaster with hourly updates and frequent progress reports. Realistically, it was only the prelude to a larger fight looming over the 2012 budget and the necessity of raising the federal debt ceiling in the weeks ahead. Now comes the frightening part. Read More
Across the media I keep seeing the discussion going back and forth about who or what is the culprit for tight business credit and a continuing sluggish rate of economic growth. Depending on the guru you tune into, the average projected 2011 growth of the Gross National Product is only about 3%, meaning that new job growth will remain lethargic for the foreseeable future. At that pace, it may take 15+ years to return to the same employment level enjoyed prior to the housing bubble.
So where is the money to fuel a more robust economy? Let’s look at all the players in that cycle: Read More
Have you heard the phrase “information age?” Truly we are living in that time, as free information connects the world more rapidly than ever before with an increasing frequency and volume than ever before possible. Technology has made everyone an expert capable of distributing facts, fiction and opinions to most of the literate world, if they will only click on your site or email. You are reading this blog as an example.
To quantify this information, Wikipedia reports that as of 2006, Google had already indexed more than 25 billion websites (long before this one existed), and was getting 400 million inquiries per day. In 2010, YouTube reported that 35 hours of video was being uploaded every minute, and that it already consumed more bandwidth than the rest of the internet. Read More