The perception that many small and medium size business owners and managers have is that financing means taking whatever money you can get; the faster and easier you can get it, the better. Unfortunately, this approach doesn’t take into account the fact that getting money for your business involves a variety of considerations, financial and nonfinancial, good and bad.

 

Businesses usually need more than just cash: they need “smart” money. Smart money is financing that helps businesses where the financier provides not only capital, but support and expertise to the business. Smart money could be an SBA guaranteed loan that allows the shareholders to keep ownership interests intact until it reaches the stage at which owners want to sell shares of the business or asset based lending, factoring and purchase order financing. On the other hand, money that comes from letting your brother become a partner in your business because you need his $10,000 before the end of the week might be far more costly than you ever imagined.

 

The problem in locating “smart” money is that the capital market for small to medium size businesses is imperfect and consists of a great variety of underpublicized and poorly organized financing sources. Whether the choice is a bank, factor, purchase order financing company, asset based lender that is willing to lend money or a business “angel” who will contribute needed equity capital, the quest for financing will require owners and managers to devote the same attention to obtaining capital as to decisions involving the business’s basic product or service.

 

Interstate Business Solutions helps business owners and managers identify relevant traits about the business’s financing profile and understand the various financing sources that may be available, with an emphasis on practical information on selecting the most suitable sources of funding for the business.

One of the most important points for entrepreneurs and managers to remember is that there is no cookbook recipe to follow for obtaining business financing. By identifying certain traits about your small business and being honest with yourself, you can determine the types of financing you can realistically expect to obtain, but attempting to slot your business into a rigid financing “profile” can limit your own creative thinking as well as the impression you give to potential financiers.

When looking for financing, entrepreneurs and managers need to present the most attractive overall portrait of their particular business by emphasizing its strong points and explaining its weaker traits. One business may have an extremely valuable asset, e.g., a technology patent, but no track record; another business may have a sizeable initial equity investment but lack short-term cash. With small to medium sized businesses, the risk to investors and creditors is so high that each financial trait is exaggerated, and any shortcomings must be balanced by a compensating advantage. Entrepreneurs and managers need to be flexible in considering how the strengths and weaknesses of their business can be presented so that they can have access to as many different sources of financing as possible.

Interstate Business Solutions assists businesses with finding lenders or investors who will take the time and effort to consider the unique characteristics of the particular small to medium size business and may eventually view that business as a one-of-a-kind opportunity.