Business Lyceum
e-Letter
Practical
Instruction in the Arts and Sciences of Making Money
SEPTEMBER 2000
Greetings & Salutations:
Money! Money! Who's got the money?
Over the past month, I guess I have fielded a couple dozen
questions about "Financing" a small business ... everything
from small manufacturers to Internet marketing companies. --
So ...
This month, let's explore the issue of ...
Getting Financing for Your Business
Having set on both sides of the desk ... both Borrower and
Banker ... I have seen the best and the worst of both worlds.
-- I have known Bankers who knew absolutely nothing about doing
business required by their "job" to pass judgment on
business loan applications ... relying upon outdated textbook
business templates to make a decision.
On the other hand, I have seen otherwise intelligent business
people ... with sound business plans and sometimes even successfully
operating small businesses ... approach the lenders with the
most ridiculous "financing plans" imaginable.
In one case, a small business owner came to me for financing
for his business. -- He needed about $150,000 to expand the business
from its current operating base. But, instead of asking
to borrow $150,000 ... which was justifiable ... he wanted to
borrow $1,000,000; putting $150,000 into the business and using
the $850,000 to create a self-liquidating sinking fund to pay
off the loan. (He told me, "That's the way the big
companies do it.")
Another "business borrower" came halfway around
the world to my bank in the South Pacific to try to borrow $25,000.
-- The loan may (or may not) have been justifiable but his business
was too far away for us to get a real picture of his "local
trade area" business. -- When I directed him to take his
request to a bank or loan company in his home town, his reply
was, "They all know me." (I guess he figured
I didn't know him, so I would give him the money.)
Beyond that ... in case after case ... "business borrowers"
approached my bank without knowing for sure exactly how much
money they needed, or what the money would be used for. -- In
most of those cases, the "cash" requirements of the
business could have been reduced to near nothing by utilizing
leasing, factoring and vendor financing. -- In those cases
where I could work with the borrower, I would take the time
to show them how to use leasing to satisfy their equipment needs;
factoring to give them a faster cashflow; and vendor financing
to increase their inventory ... without borrowing any money at
all.
Unfortunately, in the majority of those cases, the
"business borrower" wouldn't listen to anything that
didn't put the "cash" proceeds of a loan into his grubby
little paws. -- Their attitude was, "Just give me
the cash. Then, I'll use it to get what I need." --
But, as every banker knows, "cash" only has value in
a business when it is "necessary" to the business ...
not just a "wanna have."
So, if you are looking for "financing" for your
business, you should ...
First Determine Exactly What You
Need!
(Most Likely, You Don't "need" As Much As You Think.)
Back when I was serving with the "Active Corps of Executives"
(ACE) program with the "Small Business Administration"
(SBA), I was called upon countless times to review the loan applications
of, and interview, small business people seeking SBA loans.
My job was to find out whether or not the loan amount was
sufficient to the needs of the business; or excessive. -- To
that end, I looked at each loan application and asked myself
a series of multi-part questions. Questions you need to
ask yourself, before you even begin your search of business financing.
Question #1: Is any part of the loan to be used
to buy equipment of any kind? -- Can that equipment be leased,
or will the business need the cash to buy that equipment? --
If the business must buy the equipment, is there a ready market
for that used equipment should the business fail?
Question #2: Is any part of the loan to be used
to buy inventory? -- Do the vendors in that particular business
offer their goods on consignment? Open account? Short
term (90 day) financing? -- What is the minimum cash required
for starting inventory? -- What kind of cash reserve should be
set aside for future and on-going inventory? -- What is the anticipated
annual inventory turnover? -- What is the industry 'norm' for
inventory turnover?
Question #3: Does the business currently have
any Accounts Receivable? -- How much? -- What is their aging?
(How long do they stay unpaid?) -- Can the borrower Factor the
current Accounts Receivable to generate some of the cash requirements?
-- Are the Accounts Receivable too old to be Factored?
(That probably means the business should be required to review
their credit policies.)
Applying just those three questions to your "business
financing" needs will put you ahead of the game. -- You
will better know what you really need - and - by noting the answers
to those questions in your "Loan Proposal" or "Business
Plan," you will be able to show a banker where you have
made an effort to use alternative sources in your planning. --
But ...
What If ... even then ... The Bankers
Won't Loan You Any Money?
Well, don't feel like the Lone Stranger. -- Over the years,
I have seen even the best thought out and presented business
loan applications rejected by Bankers (and the SBA) simply because
the lenders lack a working knowledge of the business community
they are serving.
In that case, you might want to use ...
The Greatest Financing Tactic Of
All!
Over the past 40 years, I have seen more money raised using
this method than any other. -- In one case, I saw it generate
over $500,000 in "private" financing in less than a
week.
What is it? -- What is it?
Believe it or not, all you have to do is run a "Classified
Ad" in the newspaper ... preferably the newspaper in the
largest city near to you. But, it's not what you say in
the ad, it is "WHERE" you place the ad.
What? -- Didn't I just tell you to place the ad in the "Classified"
section of the newspaper?
YES - but - you probably think the ad should be in the "Business
Opportunities" section. -- It shouldn't. -- In order to
reach the people you need to reach, you should have your ad published
in the "PERSONALS" ... that's where it will be seen
by the Private Investors you will be seeking.
Now, here is the customary, and generally acceptable, ad to
use:
PRIVATE INVESTORS Wanted for new ____________ enterprise.
Minimum investment $xxxx. ROI ____%. Business plan
available. Call:
Of course, the ROI (Return On Investment) you offer should
be significantly higher than the interest being paid by local
banks. -- Today, 12% to 14% are good numbers.
You should have a well thought-out Business Plan prepared
to tell your story to anyone who calls - but - don't mail it
to them. When a potential investor calls, set an appointment
... time and place ... where you can meet with them. -- This
will allow you to separate a lot of the "tire kickers"
from the "real players." -- Take a copy of your Business
Plan with you and be prepared to answer any questions.
Note: Have your attorney prepare
the necessary promissory notes and/or any other legal documents
you might need. Take a set of those forms with you, too.
In some cases, you may be able to convince the investor to
write a check right then - but - in most cases, you will have
to leave a copy of the Business Plan and any necessary forms
for them to "think about." -- Follow up with them.
-- Respond to any further questions they may have. -- ASK them
for a loan ... or investment.
Should the investor decide "NOT" to participate,
ASK them to return the Business Plan and forms to you ... by
mail, or in person.
A lot of work - but - when you really need the financing,
it is a small price to pay.
Then again, you could ...
Take Your Business Public!
Hey ... that sounds a lot harder than it actually is, today.
Using "Form U-7" under the "Small Corporate
Offering Registration" (SCOR) ... adopted by the North American
Securities Administrators Association in April, 1989 ... your
business can...
Raise up to $1 million annual ... Sell stock to an unlimited
number of non accredited investors ... Use ads and telemarketing
as general solicitations ... and ... Allow registered brokers
and officers to sell the offering.
When you use the SCOR Form U-7, you don't have to go through
the regular registration process, or even file any documents
with the Securities Exchange Commission.
Beyond that, it is even easier when you need less than $500,000
because, under $500,000 you don't (usually) have to have audited
Financial Statements.
Rather than try to explain the SCOR program to you, I high
recommend you cough-up a paltry $14.95 and buy a copy
of "How To Raise $1 Million for Your Business"
... the most revolutionary manual ever written on the how,
why, what, where, when of selling up to $1 Million worth of your
stock to the public ... a step by step manual with sample replies
... including all important "contacts" who can assist
you in getting the job done the right way.
With the information and resources in, "How To Raise
$1 Million for Your Business" you could be selling free
trading stock in your company ... with no restriction for resale
... quickly and hassle free in as little as 30 days.
Order your personal copy of "How To Raise $1 Million
for Your Business" directly from the publisher at:
http://www.salesmart.com/scor.htm
Once you have your SCOR offering prepared, start selling the
issue to your family, friends, associates, and co-workers.
Also, place your classified ad in the newspaper again only, this
time eliminate the ROI and change "Business plan available"
to "Prospectus Available."
This might just catch the eye of a Big Bucks Venture Capitalist,
or some stock brokers, who will be impressed with the fact that
you already have a prospectus.
By the way, with a SCOR offering, any Stock Broker can sell
the stock for you ... in any state in
which you file the registration. (I suggest only registering
in your own state to begin with. If a stock broker wants
to sell the stock in another state, let him register the offering
in that state for you.)
Of course, there are other ways to get financing for your
business - but - these are the best ways I know of and I know
they work because I've either done it myself or helped others
do it. -- But, no matter how you go about it, always remember
...
STRAW'S LAW OF BUSINESS FINANCE
Business financing is an expedient; not salvation. It is
ONLY a way of spending tomorrow's earnings, today. If the project
AND borrower, combined, cannot logically indicate future earnings;
the lenders won't touch it with a 10-foot pole.
Note: Now that you've read this
letter, go to: finance.html
and read my article entitled, "Business Financing - To
Be or Not To Be." (I think you'll learn something.)
Of all of the legendary characters in the mailorder industry,
one of the greatest of all times is my ol'friend E. Joseph
Cossman. -- For over 30 years, he has been hailed by the
news media as "The Millionaire Maker" ... the
man who has taught otherwise ordinary people to (literally) make
millions; with testimonial after testimonial attesting to the
fact. -- Now, Joe's teachings have been brought into the
electronic age by his son; Howard Cossman. -- Over a 25
years period, Joe Cossman marketed over 20 million products
... from toys to household items; from sporting goods to insecticides
... with no more than a handful of employees at any given time.
Now, Howard Cossman has assembled all of Joe Cossman's proven
marketing methods on a remarkable new CD-ROM called "Marketing
Synergy" ... with the Cossman International Marketing
Database fully integrated into the program so all you have
to do is "click" on the links to go directly to the
web addresses ... or "click" on the internal links
to navigate within the "Marketing Synergy" program
itself. -- With the "Marketing Synergy"
CD-ROM in your CD drive ... Pentium PC, or Power Mac ... you
can market any product ... nationally or internationally ...
as many ways as possible; to as many markets as possible, right
there from your computer. -- I tried it on my computer.
Now, when I need a new marketing idea ... with all the sources
& resources at my fingertips on my computer screen ... I
just plug in the "Marketing Synergy" CD and
let my fingers do the running (I don't walk when I'm marketing
something). So ... if YOU are marketing anything YOU must
have this CD. -- The regular price is $149 - but - order your
personal copy during the introductory period and you can get
it for only $99 -- easily worth 100 times the price
to anyone who sells anything. -- Order your personal copy of
the "Marketing Synergy" CD-ROM, today!! -- Or,
at least go out to the Cossman Website and see the 11 Steps Cossman
used to sell over 20,000,000 products. -- Contact: HOWARD
COSSMAN, Cossman International Marketing, P.O. Box 4112, Thousand
Oaks, CA 91360 -- (818) 879-0330 -- FAX: (818) 879-9326
Now, let's get to some ...
Comments & Questions
Jana Trimble wrote:
"We are an outsource company providing business services
such as a free NSF recovery program, merchant accounts, automatic
debiting of client accounts, and other stuff. I'd
like to tell your readers about our FREE Bounced Check
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Okay, Jana, let's tell 'em ...
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Checks for Free!
Why spend your time trying to collect returned checks - let
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no limit on number of checks, and no long-term contracts
to sign. Our electronic process is faster and more
convenient than any other method available. It works on
any bank in the U.S. and its territories. When the
funds are settled, you receive 100% face value of the check.
You are paid weekly on collected and released funds - no more
waiting for your money! -- A great deal for merchants who
have NSF problems because it costs them nothing. In some
states, they even get a rebate to help pay for their bank
charges. Let Net30Solutions provide the answer to your
billing problems and increase your cash flow! Visit them
at http://www.net30solutions.com
Alvin Corbett asked:
"Once again I am at the feet of the master with a question.
I will have by tomorrow morning a Sight L/C opened in my favor
by tomorrow morning. For a order that must positively absolutely
get there before the end of the month now to help expedite matters
I requested a 20% deposit but if that is not forthcoming.
Is there any way I can use this L/C as meanings to finagle a
loan to (1) give my supplier what he needs to begin the order
so it is shipped on time. (2) give myself some working
capital till I can finish the deal."
Alvin:
When you get the Letter of Credit, take it to a bank in your
area that has an International Department ... hopefully your
own bank, where they know you.
If the Letter of Credit is good ... the banker will confirm
it for you ... your banker will be able to write a back-to-back
letter of credit to your supplier to get the supplier moving
on the shipment - and - depending upon your profit margin, even
be able to let you drawdown against the balance of the Letter
of Credit.
Using this method, your personal, or business, credit doesn't
come into the question. It is the "credit" of
the Letter of Credit issuer ... confirmed bank to bank ... that
makes the deal doable.
The only problem you might have is if you try to work with
a bank that has NO knowledge of Letters of Credit. So,
be sure to go to a bank with the right expertise.
Then, Alvin Corbett asked another
one:
"Here's a question ... you have a website? You
have a good product? You have a merchant account to accept
credit cards. So, how do you turn this into a profit machine
and get those first orders?"
Alvin:
Believe me ... it ain't as easy as the Internet Marketing
Gurus say it is.
First ... instead of doing all the silly postings to Free
Classifieds, Newsgroups, & FFA pages ... try to define your
target audience. -- That means knowing; or at least taking an
educated guess at, the kind of people who might want to buy your
products.
Once you have a pretty good idea "who" you are looking-for,
search the web for sites that cater to people who are interested
in your kind of products or services. -- Start with something
like "Ask Jeeves" that allows you to frame your search
in the form of a question. The answers you get will give
you clues to other "specific" words & phrases to
search.
Now, "visit" those sites and see if they offer e-zines.
-- Sign up for the e-zines. Read them. Visit the
sites recommended in the e-zines. -- Go to the Discussion Forums
& Boards ... ask questions, answer questions, make yourself
(and your web site) known. -- Always be on the look out for ways
to bring your site to the attention of the kind of people you
have identified as your potential customers.
Use every chance you get to get your site mentioned. -- Be
out-front ... identify yourself ... tell people what you have.
And ...
If you can, prepare a solid mailorder campaign selling your
product. Then, in each of your mailorder sales pieces,
tell your audience that they can buy your products at your web
site. (That's the way I started.)
Hey, as I said, it ain't easy. -- You just gotta get exposure
... make yourself known ... then, invite
ever'body to your house (web site) to see the products you offer.
Hope that helps ...
Crystal asked:
"What Are The Pitfalls Of Internet Marketing? If
research shows that 90% of all advertising doesn't get noticed,
what is the chance of grabbing all those heavy hits at your website?
What can you do to increase the probability that your message
will reach the prospects level of desire and motivate him to
buy what you are selling? If your prospect is a skeptic,
how can you overcome his doubts? If your prospect is indecisive,
how can you instill confidence in your proposal?
"As the internet speed traps offer more and more traffic
to run you down, what is the needed detour that would offer a
direct path to your website door of opportunity?
Offline advertising in newspapers, trade papers etc.? Direct
response mailouts? These seem to be in order for
to serve the purpose of gaining additional buyers and not
just window shoppers. What then can help the online business
to be more productive and profitable than a good direct mail
piece offering discounts and specials not available elsewhere?
Give me a reason to visit your online business and more than
likely I'll do some shopping there. At the moment I'm in
need of a few ink cartridges, paper and pens, a few glue sticks,
just the basics but what do I hear from Officemax or Staples?
Absolutely nothing. Can't even get a catalog sent to my
door. What does this say but that they don't need my few
bucks thrown their way. Ya know, that could amount to some
big time dollar loss if a few thousand people just like me are
considered. Which could also explain why WallyWorld continues
to grow."
Crystal:
It is a puzzlement. -- Unfortunately, most of the people on-line
are "amateurs." They don't take care of their
customers. Most of them don't even identify themselves
so you can know who to cuss when they foul up.
As for some of the "biggies" ... like Officemax
& Staples ... their sites are manned by techno-brats who
know everything there is to know about "electronic stuff"
but know absolutely nothing about business. In all too
many cases, it seems that management has simply died and left
the e-commerce side of their business in the hands of the technicians.
Myself ... the only reason my site has been successful is
because I am a known personality in the mailorder and information
marketing fields ... read my bio at the "about us"
page on my site. -- It has taken me a lot of years to establish
my credentials.
The only way I've been able to instill confidence in my customers
is by simply being available to them ... I put my full name &
address on every one of my pages; along with my telephone &
FAX numbers. -- Those who are truly serious about my products
but are somewhat skeptical can write, call or FAX me. They
know I'm where I say I am because I respond.
Keep the faith ...
P.S. -- Maybe you would have a better chance getting a catalog
if you included a "full" name in your request. -- Believe
it or don't, most business people are highly skeptical of people
who don't use their full name in the correspondence. -- Just
"Crystal" is fine for friends & family - but -
your business communications should contain a full name.
Favorite Places!
In response to my request that you tell me about your Favorite
Places on the Internet ...
Kevin Falkner wrote:
"I am partial to this site as it is mine, but I have
had a lot of people say that the reason they like it is because
I do NOT use all the moving, blinking, flashing, crap.
It is simple and easy to navigate." http://www.batterystation.com/index.htm
Kevin ... I agree ... and it provides something everybody
needs; "batteries." A requisite in our portable
electronic world.
Wayne Ford wrote:
"Absolutely the most useful website I have found is CEO
Express. Hundreds of the best links categorized for easy
search and constantly tested and revised! Wouldn't 'leave
home without it!'" http://www.ceoexpress.com/personal.asp
Wayne ... it made a great addition to my on-line tool kit.
Ever'body should have it.
Scott Cusker wrote:
"If a person wants to learn about marketing on the net,
he only needs to go to one site. Here you'll find 'Make
Your Site Sell,' 'Make Your Knowledge Sell,' 'Make Your Price
Sell,' and 'Make Your Words Sell.' -- I'm sure you'll find Ken
Evoy, MD, founder of the site, as fascinating as I have."
http://www.sitesell.com/salutary.html
Scott ... I've been reading Ken Evoy's stuff for some time.
It is good - but - I must caution you; as I have cautioned everyone
for years. -- ALL of us ol'pros in Mailorder Marketing;
and, now, ALL of the new pros in Internet Marketing, are RIGHT
-- but -- ALL of us are WRONG, too!
In the "Marketing Game" ... whether you play it
on the Internet, by Mailorder, or by opening a Store ... there
is NO right way; or wrong way, to do it. -- There are just "ways"
to do it. -- Those "ways" only become "right"
or "wrong" for your business AFTER you have tested,
Tested, TESTED, and Tested-Some-More ... discarding what doesn't
work and re-duplicating what does work in YOUR 'specific' business
endeavors.
Well ... that's it for this month. -- In order to make every
issue responsive to YOUR needs, please send me your questions;
or tell me what sources or resources you need to build your business;
or give me any thoughts you want to share with your fellow members.
Believe it or don't ... I ain't a mind-reader. -- If'n you
doesn't tell me what you need, I may never touch upon the information,
sources or resources you need.
This is your publication for you to use to your benefit ...
I am just your moderator.
Until next month, keep well ...
J.F. (Jim) STRAW
Chief Cook & Bottle Washer
Thought For The Month!
"Words are sacred. They deserve respect.
If you get the right ones, in the right order, you can nudge
the world a little." -- Tom Stoppard
Can you stump the old master? -- Betcha can't!
Over the past 40 years (man and boy), I have made bundles
of money in direct selling, service contracting, wholesale merchandising,
entertainment (I was a professional Trumpet player, vocalist
& Radio Announcer), freight forwarding, import/export, retail
merchandising, warehousing, real estate, electronics manufacturing,
finder's fees, closeout merchandising, financial brokerage, business
consulting, steel fabrication, gold and coal mining, offshore
banking, mailorder, writing, and publishing. -- That being the
case ...
No matter what business you're in ... whether you're just
starting, well on your way, or at the top of the heap ... I've
probably been where you are, done what you are doing. -- So ...
Anytime you have a question about 'how' to do something
in your business - or - if you have any comments about
anything I've said in issues of this e-Letter; or if you want
to add your 2 cents worth ... just "ask" me or "tell"
me.
Send your Questions, Comments or 2 Cents Worth to ...
with "Question" - "Comment" -
or, "2 Cents Worth" in the SUBJECT.
If I, personally, don't have an answer to any question you
may ask, I will contact some of the professionals in your field
of endeavor (I will probably know one or more personally) to
get the real 'skinny' for you.
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Copyright - 2000, J.F. (Jim) Straw. All rights reserved.