By Karlene Sinclair-Robinson
Business owners are always looking for ways to finance their businesses. There are a lot of financing options including: direct financing, personal loans, investments to the business, or family and friends. Any which way, someone has to put up the cash. For those who prefer to leverage their cash and use OPM (Other People’s Money), it is still possibly to find themselves in a jam with tradition bank financing. Having a backup plan is important in many areas of life.
When a business owner seeks out bank financing and is denied the loan, as devastating as it can be, having a backup plan can save the day. Knowing why you were denied is important. This allows you, the borrower the opportunity to fix or rectify the problem before reapplying. Knowing how to use this information will make a huge difference:
- Know industry changes – keeping up with the changes in your industry and market is crucial to continued success. Figure out how best to continue making your business a viable force when changes occur.
- Know your business – too often business owners think they know their businesses when, in fact, this is not the case. Leaving key areas such as financials to others can be detrimental to your business existence. At some point, be sure you know enough that when you read reports from your staff, you can pick up on discrepancies and nip the problems early on.
- Financing alignment – accessing the right funding solution to fit your business needs is necessary. Not all options available today would be viable to solving your financing shortfall.
- Define Need vs. Want – too often entrepreneurs tend to seek access to capital that is not necessary or truly targeted to their current and future business needs. This issue shows up in your financials and will delay the ability to obtain financing. Make sure you are clear on the reasons for obtaining capital.
- Leverage – ever heard the phrase ‘use what you have to get what you need’? Leveraging what you have can help to sustain your business and keep you going through pitfalls and downturns. It is all in how you look at what you have.
- Support system – having a support system is vital. Owning a business is just like growing up. When you were young you had family and friends to guide and support you. This is the same for business. If you do not have a support system in place, start looking at those you do business with and other entrepreneurial contacts to help you build that system. You need it.
The need for a backup plan will always be necessary. Taking the time to assess your current situation and determine next step processes can make a difference. You must define for yourself what is critical today and take the much needed action steps to develop a financing backup plan. Without addressing the current issues in your business, and life for that matter, you will never achieve the true potential for financial success. Be honest about where you are and where you would like to be, then create a viable action plan and start doing it today.