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We are living in interesting times, but as small business owners, that does not mean we can suspend what we need to do, reset the game, or choose not to move forward. If we do that, we have lost the game altogether.
Money remains the juice that keeps business going, and if your business needs money to make next season’s products, build a new facility, or open a new shop, you will need to go after it one way or another.
Here are four tips for seeking the money you need:
1. Start by going to a bank where you have a relationship. If you do not have a banking relationship, start one. Local banks are doing well, in general, so check them out. Every state regulates the banks, so you can find out about the financial condition of a local bank by going to your state’s Web site and then going to the financial institutions area.
2. Interview the lenders. Make an appointment with a lending officer either by phone or in person to discuss what he or she can do for you. Be prepared to talk about what you are doing, how much money the company is making (gross and net revenue), and how the loan would increase your gross and net revenue. Find out the amount you could borrow, the terms, the penalties, and the lender’s expectations. Ask what else the lender will do for you: I always ask what will make my company and me more than just a depositor or a borrower. Also find out if the bank holds its own loans rather than selling them off.
3. Understand that you will have to personally guarantee the loan. In the 1980s, when Lee Iacocca took over bankrupt Chrysler, he personally guaranteed Chrysler’s debt—that’s why he got so much money out of the company. Do not be offended.
4. Most business owners can get better terms and a lower interest rate through a traditional banking source. Some credit unions can work with businesses as long as the business is a depositor, so that’s another group to work with. Learn the difference between regular lenders and hard-money lenders. Hard-money lenders charge much higher interest rates, and the terms are much more stringent.
Marilyn J. Holt, CMC
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