Small business owner: But will I be able to get the funding sooner with these alternative resources?
Financial consultant: Yes, but you should build the actual costs relating to these types of loans into your budget and see how that impacts the company’s profitability?
Small business owner: I expect to repay the funds within a few months while I get my financials ready to reach out to the banker.
Financial consultant: What you are telling me is that since you do not keep your financial information current you will have to pay a higher borrowing cost. That does concern me.
Small business owner: What can I do about it
Financial consultant: I would suggest that in the future you review your financial information – at least quarterly, and not rely on your accountant to provide the data.
There are many software systems that are cloud based that will allow both you and your accountant to share data. He can always review and refine your internal data so that you have financials that you can consistently use as a benchmark for your growth.
If you cannot accomplish that, your company’s growth pattern will slow up, despite the increase in revenue. Planning ahead is an important part of business ownership.
Small business owner: Do I have to guarantee the loan?
Financial consultant: Yes, you and all owners of 20% or more of the borrowing entity must guarantee a bank loan.
That is customary for all small business loans, because the lender wants to look beyond the business to be certain the loan is repaid. And the guarantee does provide you with a much lower rate than the alternative lenders can offer.
Don’t forget that a working capital line can be a line of credit. You only pay interest on the funds outstanding.
About the author
Marjorie Weber has been educating entrepreneurs and guiding them in their search for capital for the past 16 years: combining business training programs with one-on-one mentoring. She was Chair of SCORE Miami Dade from 2010 to 2014 and is currently a financial advisor for SBDC/FIU. She also serves as an advisor to the Goldman Sachs 10,000 Small Business Program and the SBA Emerging Leaders Program and provides training for Veterans seeking an entrepreneurial path upon retirement from the service. She has been facilitating workshops under the auspices of Miami Bayside Foundation for the past 3 years. She commenced her career as a real estate investment banker in New York and Miami.She uses these long term relationships to assist her clients in accessing capital. She knows both the process and the people and has assisted in providing financing for hundreds of businesses in Miami Dade.