Should you get a business loan to "save" your new business?

You were laid off last year - and decided that you no longer wanted to rely on a corporate office to decide your future. You have always liked working outside so you decided to start a landscaping business 8 months ago.

Your problem - You have not been able to pay yourself more than $300/week and have been dipping more and more into your savings to afford basic living expenses.

Your personal banker suggested - that you try to get a loan to expand your business. When you can't even seem to pay yourself enough money to live on, is this a good move?

First of all, I always congratulate an individual on the courage to start a new business venture. Profits are better than paychecks…

In your old job as a middle manager in a large corporation, if you needed something done, you were able to throw money at a problem and delegate a team to work on the solution. As a small business owner, you no longer have that corporate infrastructure and capital available.

You must become a shoe-string entrepreneur. - Every dollar needs to count. (Contact me for a FREE copy of “A Bootstrapper's Manifesto”)

There are many possible reasons (and solutions) for a new business’ current cash flow crunch – Just a few:

• A corporate mind-set – “I have always done it like this, so this way must work”. Not usually, for a small business. A small business owner should always be improving his systems.

• Current (or non-existent) business model - If a SBO does not have a business model that is designed to increase sales (and more importantly profits) with diminishing risks (overhead and direct costs) over time, the business model may need to be re-invented. (Think R&D)

• Faulty business plan - Do you even have a business plan? Most small business owners do not have a formal business plan in place because they have often been told by their “experts” that they only need a business plan when looking for funding…This cannot be further from the truth. Remember the old axiom: “If you fail to plan, you plan to fail"

• Inaccurate or unfocused niche - You should have an identifiable market niche. (ie; "CashFlow Solutions for Small Business" ) Do not sell real estate and skin care products (at least not on the same website).

There are many, many other reasons for a cash flow crunch- A/R - A/P cycle, human capital, asset leveraging, inefficient capital use, etc...  Contact me for a FREE consultation.

Be aware that in your current phase of your business's growth cycle, additional debt service (i.e.; a business loan) may not be the best possible solution.

Utilizing a business financial consultant is always a great investment of your time and money to help you on your business trail to success.

More to follow in an upcoming BLOG on whether today’s economic climate is a great time to start a business, or not...

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Do you know a business owner that has "dead" inventory? or equipment?

This type of inventory is  called captive profit. We have a program in place to turn this inventory into a cash  flow solution. Contact us today, for a FREE consultation.