Entrepreneurship And Money – Cash Flow And Credit

Here are some facts about entrepreneurship and money. First, 99 percent of new businesses are started with what is called love money. This is your own money from your savings and your personal borrowings. It is money from people who love you and who are willing to take a chance on you. Banks do not lend money to startups as much these days. Banks are in the business of making good loans that are sure to be paid back with interest. A bank considering a loan request will usually require that the applicant prove that they have up to $5 to back up every loan dollar. In addition, the bank will want personal guarantees from the applicant, their spouse, and any other acquaintance with assets.
Once your business gets going and you have positive cash flow, you can increase your chances of borrowing money from your bank by going to it with a complete business plan—a personal financial statement. And next year\’s budget projections to show your banker that you know what you\’re doing. Ask for a specific amount of money or a line of credit and give the bank a specific date or schedule by which you will repay the money. This is what they need to know.

Before approving a loan, banks look for five essentials, the five C\’s.:

  • The first is your character, which includes your background and reputation in the community.
  • The second C is your capacity, your ability to repay the loan from the level of sales and profits in your business.
  • The third C bankers look for is collateral, the security you can provide that they can seize if you do not repay the loan.
  • The fourth C is capital, the amount of your own money that you have invested or that you are prepared to invest along with their money.
  • The fifth C that they look for is credit.

It is important to establish business credit early at the start of a business. Suppose you don’t know how you can seek out help for someone that has traveled down the same path or take a course online. There is a great business and personal credit course on www.CreditRepairAndRestoration.com. The status of your credit to date going back over your entire life, you can often borrow from friends, relatives, and even private investors who will take a share of your company and your profits in exchange for investing in your business. But even here, you should have a complete business plan to show them the very best policy for starting. Building a successful business is to start small so vigorously and grow by reinventing the profits in the business. This is called bootstrapping, where you grow more slowly, but your growth is built on a foundation of hard work and solid cash flow. When you bootstrap, you seem to get far smarter, far faster than you would if you started off with too much money. However, you finance your business; you must always be careful about how much money you have and how much you need. Never allow yourself to run out of cash. Make use of technology. We are living in the age of technology. You can use technology to serve your customers better, faster, cheaper, and easier. You can use technology to communicate quickly with customers and prospects. You can use technology to send out information quickly and do fast, cheap market research. You can use technology to sell more and more of your products over a wider and wider market at a lower and lower price—all of the technology developed around saving time, getting specific results, especially business results. And since your time is your most valuable resource, you should use every single type of technology, including cell phones, fax machines, the internet, and portable equipment, to do your job and take care of your customers faster and better than your competitors. Using technology properly can dramatically reduce the number of staff you require to run your business efficiently and well.

Ask questions, read magazines, get advice and be open to the technological advances around you that can help you build a successful, profitable business.

And always remember that if it works, it\’s already obsolete. In five years, 80 percent of the products and services you will be using in your business will be new and different from today. Many of them have not even been invented yet. Make every minute count because your time is your most precious resource. It\’s all you have to sell. Use the 80/20 rule on everything in your business. 20 percent of your activities will account for 80 percent of your results. Discipline yourself always to be working on the top 20 percent that makes all the difference to your success. Never fall into the temptation to clear up small things first as an independent entrepreneur. The most important thing you do is select your most important task and then dedicate yourself to doing just that one thing until it\’s complete.