How small businesses can capture a bank's interest.Banks and institutions that lend money have a lot of knowledge about the success rate of small businesses. Bankers are often overly cautious in making loans to small businesses. For that very reason, it makes sense to study their approach, even though it may seem discouraging dis·cour·age tr.v. dis·cour·aged, dis·cour·ag·ing, dis·cour·ag·es 1. To deprive of confidence, hope, or spirit. 2. To hamper by discouraging; deter. 3. at first glance. The Banker's Ideal Bankers look for an ideal loan applicant, who typically meets these requirements: * For an existing business, a cash flow sufficient to make the loan payments. * For a new business, an owner who has a track record of profitability owning and operating the same sort of business. * An owner with a sound, well-thought-out business. * An owner with financial reserves and personal collateral sufficient to solve the unexpected problems and fluctuations that affect all businesses. Why does such a person need a loan, you ask? He or she probably doesn't does·n't Contraction of does not. , which, of course, is the point. People who lend money are most comfortable with people so close to their ideal loan candidate that they don't need to borrow. However, to stay in business themselves, banks and other lenders must lend the money deposited with them. To do this, they must lend to at least some people whose credit worthiness is less than perfect. Measuring Up to the Banker's Ideal Who are these ordinary mortals who slip through bankers' fine screens of approval? And more to the point, how can you qualify as one of them? Your job is to show how your situation is similar to the banker's ideal. A good bet is the person who has worked for, or preferably pref·er·a·ble adj. More desirable or worthy than another; preferred: Coffee is preferable to tea, I think. pref managed, a successful business in the same field as the proposed new business. For example, if you have profitably run a clothing store for an absentee One who has left, either temporarily or permanently, his or her domicile or usual place of residence or business. A person beyond the geographical borders of a state who has not authorized an agent to represent him or her in legal proceedings that may be commenced against him or her owner for a year or two, a lender may believe you are ready to do it on your own. All you need is a good location, a sound business plan and a little capital. Then, watch out Neiman-Marcus! Further away from a lender's ideal is the person who has sound experience managing one type of business, but proposes to start one in a different field. Let's say you ran the most profitable hot dog stand A hot dog stand is a food business stand that sells hot dogs, usually from an external counter on a public thoroughfare such as a road, street, mall or food court. in the Squaw Valley ski resort For other places with the same name, see Squaw Valley The Squaw Valley Ski Resort in Olympic Valley, California, is one of the largest and most high-concept ski areas in the United States, and was the site of the 1960 Winter Olympics. and now you want to market computer software in the Silicon Valley of California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). . In your favor is your experience running a successful business. On the negative side is the fact that computer software marketing has no relationship to hot dog selling. In this situation, you might be able to get a loan if you hire people who make up for your lack of experience. At the very least, you would need someone with a strong software marketing background, as well as a person with experience managing retail sales and service businesses. Naturally, both of those people are most desirable if they have many years of successful experience in the software marketing business, preferably in California. Use the Banker's Ideal It's helpful to use the bankers' model in your decision-making decision-making, n the process of coming to a conclusion or making a judgment. decision-making, evidence-based, n a type of informal decision-making that combines clinical expertise, patient concerns, and evidence gathered from process. Use a skeptical attitude as a counterweight coun·ter·weight n. 1. A weight used as a counterbalance. 2. A force or influence equally counteracting another. coun to your optimism to get a balanced view of your prospects. What is it that makes you think you will be one of the minority of small-business people who will succeed? If you don't have some specific answers, you are in trouble. Most new businesses fail, and the large majority of survivors do not genuinely prosper. Many people start their own business because they can't stand working for others. They don't have a choice. They must either be boss or bum 1. bum - To make highly efficient, either in time or space, often at the expense of clarity. "I managed to bum three more instructions out of that code." "I spent half the night bumming the interrupt code. . They are more than willing to trade security for the chance to call the shots. They meet a good chunk of their goals when they leave their paycheck behind. This is fine as far as it goes, but in my experience, the more successful small-business people have other goals as well. A small distributor we know has a well thought-out business and a sound business plan for the future. Still, he believes that his own personal commitment is the most important thing he has going for him. He puts it this way: "1 break my tail to live up to the commitments I make to my customers. If a supplier doesn't perform for me, I'll still do everything I can to keep my promise to my customer, even if it costs me money." This sort of personal commitment enables this successful business owner to make short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. adjustments to meet his long-range goals. And while it would be an exaggeration Exaggeration Bunyon, Paul legendary giant, hero of tall tales of the logging camps. [Am. Folklore: The Wonderful Adventures of Paul Bunyon] Jenkins’ ear trivial cause of a great quarrel. [Br. Hist. to say he pays this price gladly, he does pay it. John Hefner is an independent business consultant based in Studio City. |
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