A recent Wall Street Journal article reported that ten of the largest banks that issue small loans to businesses, lent a total of $44.7 billion in 2014. That’s down 38% from a peak of $72.5 billion in 2006. Doing a quick math addition, that means banks are lending about 30 BILLION less in small business loans. That’s a mighty sum. If banks are lending less, what is a small business owner to do?
While that fact may seem like the tolling of the bells for small business investing, it really doesn’t. There are lots of viable, and frequently less-expensive alternatives. We’ve had tremendous success at helping clients raise millions of dollars ear using the following methods. Think of them as StartupConnection’s “out of the box” kind of financing.
Help businesses create a viable business plan, a requirement for any sort of financing. (We’re always surprised at how many clients cannot answer basic questions like: How much money do you need? What are you going to do with the money? How will you pay it back?) If asked, suppliers are frequently willing to help with financing a startup business by things like financing and holding inventory, reducing production times, and shipping direct. There are new techniques in business today that can assist a startup, that are efficient, and may not mean a big investment by business owner and supplier. While credit card interest can accrue (and be expen$ive) if not paid off right away, they do offer a startup business a 30-day free program, or zero interest for sometimes up to 18 months with a new account. Follow the 80-20 rule. That is: 80% of your sales will be with 20% of your products and customers. (We have helped virtually every client significantly reduce inventory and increase sales by selling off losers and having the winners in stock.) Better planning reduces inventory. Your better sellers frequently have consistent sales which allows you to more accurately forecast orders and deliveries. That, in turn maximizes order quantities, and minimizes leftovers. If the business is profitable and growing, you can frequently finance the growth with working capital from profits. This also means giving up less equity. Selling on the internet (especially Amazon) can be a viable way to increase sales, increase margins and avoid receivables. Bartering, alliances and exchanges are viable methods to get both excellent services and save cash. Crowdfunding and angel investing are easier to become a part of, and have become significant and viable sources of funds. But, my advice? Get an expert to help you.
These methods are available in one form or another for every new business. What’s needed is understanding how they work, keeping an eye on these programs as your business grows, and be open to these alternative tried and true methods. Your business can still “have a wonderful life,” be profitable and enjoy a winning business practice without having to look to a bank for support.
