Business Directory and Guide - iBizDir.com

There are several disciplines that are required to master in owning a successful business.  Some you will find that you are a natural at, and others you will need to find a way to quickly become adept.  You will need to be well-versed when it comes to marketing, sales, customer and client relations, time management, planning, financial management and thrifty spending.  On top of that, you have to know how to deliver outstanding products and services, all while mastering the delicate skills of balance at home. 

How to Work With Banks, Not For Them
For new businesses, it is often difficult to foster a bank relationship to the extent of getting a loan or line of credit strictly based on a good idea.  Though bankers will love to sit around and listen to your great ideas, their intention is commonly to build a relationship with you so that when you are able to produce a strong application for funding, they will be the first ones that you turn to because they were there in the very beginning when your business was just a good idea.  What is it that banks are looking for?  And what is it that you should be looking for from a bank?

Lenders want to see collateral and they want to see a history of revenues that would allow them to feel safe in their investment.  Your history of revenues will allow for a calculation that would determine a comfortable monthly payment that you can make back to the bank on your loan, and your collateral will provide a safety net that the bank can lean on in case something happens within your business that would impact your ability to pay back your loan. 

If you are looking and purchasing a franchise, your bank is more likely to lend you money because the franchise has a history of revenues that can be incorporated into your application.  When you are shopping for banks, make sure that you understand all the fees that are associated with your relationship.  Small fees can add up over time and could be a variable in your decision with which bank you end up building your relationship with. 

Often time’s businesses view their bank relationship as being so vital to the cash flow of their business. Bank relationships are important, however when you look at all the other avenues of increased cash flow, you will find that banks are only one entity that your business needs to build a relationship.

Often times, if an applicant is unable to get a small business loan, they may opt for a home equity loan and put their personal property up as collateral on the loan.  This is a risky form of funding because your house is at stake.  Another option is to offer your checking or savings account with funds in it as collateral.  Depending on your credit situation, there may be unsecured loans that are available at higher rates of interest. 

If you search for sources for unsecured loans, many of the funders are not banks, but rather brokers and third parties.  You will find that interest rates vary greatly and the better your credit and less risk involved with the loan, the better interest rate you will receive.  Read all the fine print because terms and conditions vary greatly, especially in terms of penalties for paying the loan off early and additional fees involved in fostering and facilitating the loan.

Watch Your Credit Cards, They Are Not a Bottomless Money Pit
It is tempting to fund your ideas with your credit cards, especially with seductive credit lines that are offered by credit card companies today.  However know that it is a financial trap to access those funds at interest rates that would make profitability prohibitive on most margins.  Credit card companies know that single digit interest rates can be hiked up at any time. Do you?  Your capitol is very precious and as a business owner, you ought to be very cautious in spending your valuable capitol on interest payments.  Save your credit cards to be your lifeline in difficult financial crunches.  Don’t use them as capital just because they are easy to access.  Take them time to get a long-term line of credit that has a reasonable interest rate for long term use. 

Some credit cards offer cash advances and again, this is a very tempting source for cash to start your business, however be aware of the interest rates that you would be paying.  Often times there are other resources available that will be less expensive in the long run.  If you do use credit cards, make sure that you use cards that offer rewards programs.  Use them for your high-ticket purchases that you intend to pay with cash, and make the payments on the card right away to alleviate the interest, but still collect the reward benefits. 

Some credit cards also offer lines of credit where they offer you checks that you can use to pay a bill or make a deposit into your checking account and in some instances, the amount of the check reflects as a charge on your card, and in other instances, it is a separate bill.  Take a look at the interest rates of all the options and figure out the best option for your business needs that offers the flexibility that you may need at the lowest possible cost.

If you find yourself experiencing crunches where you have to rely on your credit cards to bail yourself out, you will need to evaluate the loopholes in your budget and spending to see where you can plug your financial holes.  Always know your numbers and maintain an accurate picture of how much you have coming in, and how much you have going out.  Your cash flow is like the veins of your business and must be cared for and watched to maintain your business stability.

SBA for the Big Dogs and Small Alike
 There are also resources at the Small Business Administration where you can benefit from a wealth of knowledge from professionals and seasoned entrepreneurs.  A special service offered by the Small Business Administration includes a group of retired business owners and managers who offer free consultation sessions with up and coming entrepreneurs.  These free sessions allow you to benefit from the knowledge amassed from experience that can not be duplicated from reading books or other research.  There is no one that knows everything that there is to know about running and business and no one will ever expect you to know everything that there is to know, however the successful entrepreneurs will know what they don’t know, and further know people who know what they do not.  Always make an effort to really listen to those who are on the outside looking into your vision, as their prospective can offer some valuable direction.

There are numerous loan programs available through the Small Business Administration, including the Patriot Express program that benefits veterans, military members, their spouses and others.  There is also the 7(a) Loan Guarantee program which guarantees small business loans through banks and the Small Business Administration can refer you to participating banks to that program that will be friendlier to small business applications since a portion of the loan made will be guaranteed by the federal government in an effort to stimulate the economy through small business.  The Micro-loan Program is a program that is primarily funded through non-profits and this loan program is common in funding start-ups for amounts less than $35,000.  The Small Business Administration can help refer you to the appropriate channels to participate in the program that is right for you, and remember their services offer support beyond funding. 

Government and Grants, Myths Dispelled
Many individuals invest valuable time and money in seeking grants to start their small business.  The government does not offer grants to private businesses to expand or start a new business.  Rather, the government offers grants to non-profit organizations who in turn offer grants to support new businesses and expansions of existing businesses.  Learn who the non-profits are in your local area that support small businesses and you will learn about the programs that are available, many of which are funded through government funds. 

Some agencies will offer grants to help you get a business plan together by covering the attorney or CPA costs of producing the necessary documents that you may need to proceed with your quest for funding.  If you intend to complete an Small Business Administration application for federal funding through any of their loan programs, you will need a very comprehensive business plan, and there are many programs available through state and local government that help small businesses produce those documents.

If you are looking for grants, it helps to know where to look.  Do not spend money for information on where to apply for grants.  There are a ton of resources on the Internet that will ask you to pay anywhere from $5 to $49 for lists of foundations that offer grants.  Sometimes the information is not accurate, or it may not fit your needs.  Often times, these exact resources are available at the library.  If you want quality information at no cost, turn to your local librarian who will turn you to resources that you can read, usually reference documents that can not be taken out of the library, and have confidence in it’s reliability.

Investors, Where are They?
There are many different types of investors that you can explore to expand your business.  Venture capitalists invest primarily in innovation, and will typically invest millions of dollars at a time.  Angel investors are usually wealthy individuals looking for a return on an investment on something new and innovative as well.  Angels tend to form closer relationships with the entities that they fund.  Both have very specific ways in which they want to be approached and require a formal business plan and answers to questions about projected revenues and risks involved.  Often times, funding coming from an investor does not have to paid back until the business is sold.  Most investors will have a stake in the business as a partial owner with some decision-making abilities. 

Now with the technological age of the Internet, there are numerous resources where you can seek connections with investors.  Prosper.com is one resource where you can build a profile and network with lenders who may be interested in working with you based on your credit history, financial state and your business purpose.

Find Your Warm Markets
Your warm markets are those that are close to you.  Your friends and family who will invest money in your business through a loan or an ownership-based investment.  You can show your warm market your business plan or offer a presentation on how you will market your product or service, and through a reason able projection or revenues, you can receive a cash investment, or agreement to work for a deferred payment.

Agreements, even with family members, should be in writing.  You can use a third party to prepare the loan documents based on your agreement terms and the documents should detail the partnership, the liability and other pertinent details. 

If you are turned down, remember to ask for feedback.  Why did they turn you down?  What could make your presentation better?  Maybe it is not the right fit for them, but do they know someone that may be interested?  Do they think that the business is not viable, or do they just not have the cash to put forward?  Your friends and family ought to be the most candid source for information on your presentation.  Even if you know right off the bat that they may be unable to contribute to your idea, it may be worthwhile to offer them a presentation just for the candid feedback.

Your Suppliers Have a Vested Interest In You
Once your business has cash on hand, you can negotiate with your suppliers to keep the cash on hand longer.  Instead of paying your vendors in 15 days upon receipt of the bill (Net 15), you can negotiate for Net 30 or Net 60.  Typically, you can negotiate these terms without any interest, which can provide very valuable cash flow for your business since that same money coming from a bank into your business would cost interest. 

Just as saving money adds to your bottom line, holding onto your money avoids you having to tap into resources that may charge interest for cash so the longer you are able to hold onto your cash, the better your cash flow will be.  Pay your bills on time, but do not pay them so early that you may end up risking a crunch where you will have to turn to your credit cards and pay high interest rates on money that you could have used for free.

Factoring Your Factors
Factoring invoices is an option for many businesses when they are in need of cash from their accounts receivable on terms that are offered their customers of Net 30 or more.  Perhaps your customers need Net 30 or Net 60 to pay their invoice, and you are not in a position to demand the money sooner, however you need the funds.  There are businesses out there that will buy your invoices and offer you a percentage of the funds upfront, and when the invoice is due, they will collect and keep the full amount.  The percentage they offer is typically based on the risk of the invoice.  What is the credit history of your customer and what is your history with that particular customer?