The Primary Cause Of Business Financing Frustration

The Primary Cause Of Business Financing Frustration
By: Brent Finlay

Finding proper business financing is not easy at the best of
times for most small and medium sized business owners and
managers.

There are a number of reasons that collectively explain why the
business financing market can be so difficult to understand and
navigate.

But probably the single biggest reason is the lack of useful
information about how the business financing market actually
works.

Business financing information and education sources
predominantly come in two forms: 1) Text books; 2) Major bank
advertising.

If you've ever read through a educational finance text book or
taken a business financing course, you already know how
difficult it can be to apply the theories, principles, and
strategies to a small or medium sized business.

Our formal education system provides limited information as to
how the market place works, how to plan for financing
requirements, how to manage periods of growth, decline,
transition, start up, etc.

Sure academic books and courses can go through all these areas
in great detail, but is the information practical, real world,
something you can relate to and apply yourself as a manager or
owner of a small or medium sized business?

In most cases, the answer is a resounding NO.

Most finance text books speak to big business financing
dynamics that are not easily transferable to small and medium
sized business scenarios.

Outside of the formal education system, the next great source
of business financing information is the information provided
by the major banks, which they tend to make available to you by
the boat load through their broad based marketing campaigns.

Unfortunately, the information by itself seldom helps you
determine if a particular institution would be able to provide
you with financing, or what would be required to qualify for a
loan.

The good news is that business financing sources continue to
grow in numbers as more and more lenders carve out a particular
piece of the market to service. In order to take advantage of
these alternatives, you need to have a solid approach in place
when seeking business financing.

Here's a short list of things to consider

>>> Develop a solid, ongoing, understanding of both your
personal and business assets, income, and cashflow.

Regardless of the business financing model, these elements will
always come into play to some degree.

Being able to demonstrate a solid understanding of your
business financials is also an indication of your ability to
manage the underlying business.

>>> Monitor and manage your personal and business-credit.

Small and medium sized business financing is focused on both
personal and business credit-histories.

Regular reviews of both personal and business credit-reports
from the major credit-reporting agencies are important to avoid
errors and credit-practices that can severely damage your
borrowing power.

>>> Develop your marketing position.

Yes, seeking business financing is a marketing exercise.

When applying for business financing, you're marketing your
business to lending sources and they in turn are marketing their
business financing programs to you.

Think of the lender as a customer to better understand what
they're looking for. Then, develop a business proposal that
addresses all their potential needs and concerns.

>>> Research Lending Sources

There are lots of business financing sources. But there is also
lots of variation in the types of business applications each one
is prepared to consider.

Broad based lenders rely on credit-history and net worth. As you
get more specific in terms of financing application and
industry, lender programs become more narrow and can be harder
to locate.

You need to consider things like industry, sector, and geography
when looking for business financing sources.

Financing consultants and business loan brokers can be an
excellent source of information to aid you in this process.

>>> Qualify The Lender

Before you make a formal application, find out if the lender has
the programs and lending track record to meet your specific
needs.

Too often, the lender is doing all the qualifying.

>>> Compare your options

Depending on the scenario, there can be several financing
strategies that could work for your business.

Make sure you take the time to compare before making a decision.
The extra time spent could save you considerable time and cost
in the long run.

>>> Start Today

Regardless of what your business financing needs are today, you
should regularly invest time staying on top of your business
financials, monitoring your credit-history, and researching
financing sources that fit your industry and potential future
requirements.

When the time comes to acquire capital, your proactive efforts
can make all the difference in getting the capital you need with
terms and timing that are acceptable to your business.