So are many other of our small business owners so we did some research–a lot of research. What we found is that there are a lot of bad people out there in this market. People ready to take advantage of small business owners. So as we looked into it we identified over 30 sources of funding that covered the spectrum of need. Some are for the poor credit, lots of problems people and some are for those who have good credit and few problems. Their terms range from very high interest with daily drafts from your bank account and personal guarantees to competitive rate lines of credit. Contact us and we will gather information and submit it to the appropriate array of lenders and very quickly identify what can and cannot be done for you. Generally this is done without initial credit checks that “ding” your credit. In some instances you will need to present your story in its’ best light–prepare a package for presentation–in which case we can help and in other cases an applicant is strong enough not to need this work. Regardless, if you are looking for loans in the $25,000-$250,000 range you should give us a call to assist.
303 338 9300
Most business owners understand their product but lack expertise in raising money through debt or equity. Obtaining proper capitalization is critical to growth and the long-term success of your company.
There are basically two ways of increasing your availability to funds—equity and debt. The advantage of raising money through equity is that you don’t have to pay it back. It is infusion of funds—most likely large amounts of funds—that immediately provides cash for your use. The obvious downside is that you give up some portion of your ownership. The first place to look for quick equity is to friends, family (and fools). The owner is the best salesman and representative of the company and they often develop a “deck” to assist them in this venture. A deck is merely a power point slide show that the owner can use in presentations that they are making. For this purpose they are often very good but don’t be fooled—these “investors” are not buying into your company because of your dog and pony show—they are actually “buying” you. They know you, they believe that you can be successful and are willing to invest because of that belief. It certainly helps if you can have other collateral materials to support your cause but chances are you are the reason for their investment. To move to capital markets to raise real money you need the use of a professional investment banking firm that can take your compelling story to another level and attract professional investment rather than emotional investment.
Debt is the second way to raise cash. There is good debt and there is bad debt. Good debt is matching long term needs with long term payments and vice versa. Good debt is a mortgage on your house—bad debt is mortgaging your house to pay off your credit cards. Debt can be raised from either commercial banks or a secondary market. If possible banks are by far the best option. Banks have the best interest rates and create advantageous long term relationships. Unfortunately banks are regulated by the federal reserve and if you do not meet their required ratios or are in an undesireable industry you simply will not be their customer. They may never say no. Instead they may just constantly ask for more information until you give up. Regardless, you are not going to get your money. Secondary markets are in many ways the wild, wild west. Many brokers lack the expertise to get your deal done. The litmus test should be in the information that they require and in how they use those materials in compiling the package that they use to present your compelling story to market. Lacking a professional package you will not receive serious consideration from credible lenders. As a minimum the package needs to include significant financial information; third-party validation of the business plan; market and competitor analysis; demonstrable evidence of management team and operational competency; financial projections; corporate regulatory compliance; and analysis of off-balance sheet assets. Thien this must be packaged in a professional format acceptable to the professional readers. Often times good deals are not financed simply because they didn’t make the investment do the work that is needed to properly present them to market so be wary of brokers who do not speak this language.
Proper capitalization is critical to a business’ success. Most small businesses were started with an idea, a commitment and a credit card. If they survived and prospered they created profit and cash flow but often lacked a capitalization strategy.
Capitalization is the combination of both equity and debt. Equity is acquired through either external or internal investment. Does your company have a strategy for the accumulation of equity? Probably not. The most obvious method of increasing equity is through cash retention. Some percentage of all cash intake needs to be retained—this is the purchase of an asset—the purchase of cash. Cash is just like any other asset—you have to buy it—and it is one of your most valuable assets. Despite its’ value many business owners fail to purchase (retain) cash. It won’t happen by itself. You need a strategy for cash retention if you expect to build a strong, secure business.
Credit is also an important component of capitalization. Banks will not lend you money when you need it—they lend you money when you don’t—therefore you need to actively seek credit when you don’t need it. You should also diversify your credit. Utilize multiple lenders. In today’s environment with institutions combine and your “personal relationship” with your banker is a thing of the past. Just like over-reliance upon a single customer or vendor is a red flag so is your over-reliance upon a lender. Don’t be held hostage.
How much and what combination of debt, cash and other assets should you have? Make this a topic of your on-going planning.
The Fremont Group would like to share a NYT article about non-bank sources of working capital – the cash needed to run your business while wating for invoices to be paid. New online lenders are proliferating, often extending credit based on invoiced revenue. One online lender we support is The Finance Store. Bank loans cause you to lose time and waste effort filling out miles of paperwork and then they leave you hanging on for a decision. Online lenders are much more flexible, leaving you to use your time most effectively – running your business.
The Fremont Group can now refer to you a financing program that will allow your client to finance your consulting project and their other needs. 48 hour response and 80% approval! Whether its working capital, unsecured finance, term loans, revenue loans, equipment finance, SBA, retirement funding or custom funding packages, your clients will receive fast approval and rapid funding. Many of your clients will qualify for multiple funding opportunities giving your clients their choice of options. We recognize the need for you, the advisor, to help guide your client/borrower in their selection of the type of financing best suited to the clients’ situation. Your clients depend on you for advice, strategy, compliance and planning and you may very likely be responsible for helping to pick one of the several options that will be offered. Their dedicated staff will assist you and your client in choosing the best funding or financing option.
In today’s banking environment, a significant percentage of potential borrowers are turned away by their banks at a time when either opportunity presents itself requiring capital investment, or available cash resources are insufficient. In either case, the potential borrower is left to fend for themselves. We endorse and will refer you to Cascade Pacific Capital, LLC. Whether its working capital, unsecured finance, term loans, revenue loans, equipment finance, SBA, retirement funding or custom funding packages, you will receive fast approval and rapid funding. Many of your clients will qualify for multiple funding opportunities giving your clients their choice of options. The Fremont Group will work with you through this process.
You will receive “real time” status of your progress including approval amounts and requirements to keep things on track. The system also provides real-time visibility of all important correspondences and communications throughout the process including calls, voice mails, faxes, messages. A Senior Funding Specialist will be assigned to you and to assist and educate you through the process.
Within 48 hours of submitting the completed application and documents, you will issue a prequalifying approval. Final approval is normally made inside 5 business days although certain loans like SBA loans can take substantially longer.
Contact The Fremont Group at 303 338 9300 to discuss your financing needs.
The recent credit crisis has changed the playing field for small business owners. Are we like the stock market novices who are always behind the curve? Should we never again go to the bank? How risky is it to finance your cash flow with a line of credit? Should we defer buying decisions? Should we have relationships with more than one bank? Should we get our credit line when we don’t need it or will it be pulled anyway? The real problem is that no one knows the answer—there isn’t one.
I often hear the goal of a business owner as “I want to pay off my debt.” When questioned more closely the source of this goal is the frustration and perceived risk of having debt and the debt payments. The idea that the owner would make more money if he didn’t have the debt is a little illusory—the debt also helped build the businesses. What is good debt? There are two criteria in answering this question—the type of debt and the use of he debt. Is owning a home a good thing? Of course and few of us would own homes if we had to save the money and pay cash, but would it be a good thing to put the purchase of your home on a credit card? Long-term assets need to be purchased with long-term debt. The converse is also true—don’t pay off your credit card with a home mortgage. Short-term assets need to be purchased with short-term debt. So the first criteria is to match the type of debt to the type of purchase. The second (and probably more important criteria) is the use of the debt funds. A good use of debt in a business is to finance growth (inventory, cash flow, etc.) and to purchase assets that produce income in excess of their cost. Obviously we don’t want to use debt to purchase non-income producing assets (like toys) for a business. Be careful about using debt as a tax plan. Businesses that run their business with the objective of minimizing taxes are missing the point—the business needs to be run for a profit. Of course all debt—even good debt—brings with it risk. One reason the owner gets the big bucks is to make the decisions that balance the use of the debt with the risk.
Over the years hundreds of companies have approached us with requests for financing. The vast majority of these companies had already been turned down by their bank. The lack of cash is a symptom—the disease is the reason why they are out of cash. Putting more money into those companies (treating the symptom) would only delay the inevitable—unless you first treat the disease. What is amazing is how few of those same companies really understood their disease much less had a plan to treat it. The three most common causes of a cash shortage are uncontrolled growth, lack of cost controls tied to falling sales, and a lack of profit. Additional financing does not address any of the real, underlying problems.
In start-up situations inadequate capitalization is very common. If people waited until they really had adequate capital to start their business there would be few businesses. More commonly they started with a credit card and a few borrowed dollars. In order to avoid giving up any of their equity, what they are really doing is trying to substitute equity with debt. Suffice to say that this is an unlikely course of events and the only proper way to develop your company is to establish equity—make a profit and keep it in the company. After all of the personal sacrifices that the owner has made to get the business going it takes a mature individual to again delay personal gratification for the sake of making the business more secure but then it takes a mature individual to make a business successful.
For businesses beyond the start up stage you must face the fact that your bank has turned you down and you need to face the facts that caused this rejection. Look first to the fundamentals—your income statement and your balance sheet. Where are the warts and how are you going to eliminate them? Look to your credit rating. Our counselors will tell you that personally (and at our level there is no difference between personal and business) your credit score is more important than your income. What is your score, what does it need to be, and what is your plan to obtain it? Are all of these (and others) adequately addressed in both your business plan and in your bank package? Is your business plan designed to really win the game, is it the focus of your daily operations, and is under constant review? Is your bank package a complete, professional, due diligence package that presents your company (the good and the bad) in the best possible light?
Often times a company doesn’t have effective “sales tools” to use in obtaining financing. Calling on the bank is making a sales call. If you called on a client as poorly as you called on your bank your conversation would go something like this, “this explains our product and as you can see it doesn’t work very well. I want you to buy it and pay top dollar anyway.” As absurd as this sounds one of the most common reasons why companies cannot get adequate financing is the quality of their “sales tools.” The last thing a bank needs on their balance sheet today is a new “toxic asset.” Before you even ask for a loan make sure that you are not the “toxic asset” that your numbers seem to describe.
The first leg of the stool is to understand your problems and make sure that you really have a plan to solve them; the second leg is your bank package and presentation; the final leg is who you are approaching. You have already tried your conventional route and failed—you need to expand your search to a secondary market and you need to work with a specialist to do so. Unless you are a business owner who doubles as a financial specialist, you need to work with someone who is.
There can be no guarantees when it comes to obtaining financing. Every company and every case is unique. All you can do is increase your chances by doing things right.
There is money available for small business loans again. Even small businesses can qualify for a minimum of $25,000 if you submit the right package to the right place. We can talk about it at our Minding My Own Business Workshop!