BUSINESS FINANCING
To Be or Not To Be!
by: J.F. (Jim) Straw
Over the years, there have been literally thousands of reports,
articles, monographs, books, booklets, and courses written on
the subject of "business financing." - Some are tomes
of great wisdom; offering the reader insights into the technical
mechanics of capital utilization, equity determinations, unsecured
borrowings, time sales contracts, public stock issues, and loan
applications. Others are 90% hype; offering the reader false
hope, based on misinterpretation of fundamental financing techniques
and principles (like the non-existent 5 to 1 compensating balance
on small, insignificant loans).
Unfortunately, the number of written works in the "hype"
category far exceeds the small number of well-written, factual
works of knowledge. These "business fairy tales," due
to their misinterpretations, misrepresentations, and easy-money
proclamations, lead the uninformed small businessman (or opportunity
seeker) into believing that "any & every" business
proposition is financeable; if you can only locate the right
source.
All too often, the beginning Money Broker/ Financial Consultant,
having read one (or more) of these "hype" reports,
believe the only thing he needs are more and more sources. He
erroneously believes that, if he has enough sources, he will
be able to locate funding for anything that crosses his desk.
- Nothing could be further from the truth.
Statistically, less than 5% of the financing requirements offered
to a Money Broker/Financial Consultant are even worthy of consideration.
Yet, you will find that most beginning Money Brokers will accept,
and attempt to place, "every" financing request they
receive; regardless of their merits. - Is it any wonder that
funding sources view Financial Consultants with cynicism?
Yet, the question I get asked most often by beginning Money Brokers
is, "Where can I find more legitimate sources of financing
for my business projects (or client's projects)?" -
In answering that question, I usually start off by telling the
questioner a "true" story.
Back in the days when I was doing some money brokering, I had
a man come to me with a business project that was (in my eyes)
out of this world. It had everything and my client had outdone
himself in preparing all of the necessary paperwork.
At first, I contacted all of the BIG lenders listed in the various
directories. -- I got some interest but not much hope. -- Then,
I had a person contact me needing a personal loan of a couple
thousand dollars, so I went down to the local office of a nationwide
personal finance company.
The manager of that finance company readily approved the couple
thousand dollar personal loan...then, I told him about the bigger
business project I was working on. -- He asked to see it. --
In no time at all, he had his district manager looking over the
project and it was funded in less than 30 days...to the tune
of a few hundred thousand dollars.
So, when anyone asks me about "where" they can find
'legitimate' financing sources, I ask them one question in return,
"Have you looked in your local Telephone Book Yellow
Pages?" - Believe it or don't (as you will), you can
find an abundance of direct sources of financing in your local
Yellow Pages, all you have to do is look - and - although
the local offices of those finance companies don't usually advertise
their bigger offerings, they will usually entertain them through
their district or regional offices. -- When you're looking for
more 'legitimate' financing sources, don't overlook the obvious
... Check Your Local Telephone Book Yellow Pages!
Another gross-misunderstanding held by the vast majority of small
business people, and (sadly) beginning Money Brokers, is that
tangible property collateral will make a loan. - Collateral proffered
without a sound plan for utilization of loan proceeds, or with
a lack of skill and/or tenure by the borrower, has NO real value
in the money market.
On the other hand, a solid plan for utilization of capital, from
a knowledgeable borrower, can generate its own collateral position.
- I, personally, have seen a piece of real estate with a market
value of less than $100,000 used to collateralize a loan of $250,000.
The plan was solid, the borrower was knowledgeable and successful
in his field, and the bank re-appraised the property itself;
to reflect the higher loan value in its portfolio.
To insure your success in the money market, or as a Money Broker/Financial
Consultant, it would be wise to take to heart and utilize Straw's
Law of Business Finance, when considering any requirement for
business funding.
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.
And, always remember not to overlook the obvious in your search
for a real, 'legitimate' funding source ... right in your own
backyard ... listed in your Telephone Book Yellow Pages.