Solutions For the Business Financing Puzzle

The comparison of small business financing to a puzzle is not meant to diminish the critical importance of success by business owners when they encounter difficulties with commercial lenders. The most practical goal for using a puzzle analogy in this article is to help describe an otherwise complex working capital and commercial finance situation in a more understandable way. The current commercial loan stakes for commercial borrowers are high because their business survival might be hanging in the balance.

In using a puzzle comparison, this analogy provides an opportunity to evaluate the commercial loans puzzle (a challenging commercial lending climate) as something that tests the ingenuity of small businesses to solve. When reviewing the current small business finance environment, an increasing number of commercial borrowers are comparing what they are finding to a puzzle with pieces scattered everywhere. The ongoing descriptions of commercial financing in terms of solving a puzzle should provide a reasonable reflection of the underlying problems that cannot be ignored by a prudent business borrower. The growing confusion represented in small business owner interactions with their current bank concerning available business financing options is no doubt also reflected by such an analogy.

Recent experiences by many commercial borrowers with their business banker probably resemble a constantly changing level of difficulty for an already confusing small business finance puzzle. It has become a common experience for banks to take over two months for a working capital financing process that should realistically be completed in three weeks or less, and in many cases even then the lender does not complete the process for providing the requested working capital to the business which has been waiting without any awareness that funding might not be finalized. Suggestions that commercial lenders have misrepresented what is required to finalize commercial loans are emerging in too many reports for borrowers to ignore.

For a number of years most business financing has been more complicated than borrowers realize. Recent events have made these complexities more obvious primarily because the eventual results have changed so drastically. It is situations like those noted above that cause business borrowers to feel like some of the required puzzle pieces have been removed from the board. In effect that is exactly what has happened in many cases because fewer banks are now providing small business financing. When this happens with the bank that a business has previously relied upon for their small business finance needs, a business owner is indeed likely to feel as if the commercial finance puzzle pieces have disappeared.

By continuing the puzzle analogy, there are two practical options for commercial borrowers to analyze and consider. First, in an approach which can lead to a small business finance puzzle which will involve “fewer pieces” if executed successfully, business owners should assess the potential for a reduction in their commercial debt requirements. Second, by looking for alternative commercial lending sources, small businesses should attempt to find the “missing pieces”. As with any complex business financing situation, both of these (as well as any other realistic commercial loan choices) should be thoroughly reviewed with the help of an experienced expert.

What Are the Biggest Problems Small Businesses Are Dealing With?

The study from the National Federation of the Independent Business Research Foundation, sponsored by Wells Fargo, recently researched the issues that small business owners consider to be the most problematic in their work. No wonder, on the top is the problem with health insurance, but liability insurance as well. In second place are the business costs and difficulties with small business financing, with emphasis on the tax cluster and worker’s compensation.

Difficulties such as incompetent employees, problems with customers and suppliers and inability to organize their time between job and family are also regarded as important, but with much lower ranks, according to this survey. Even though most of the small business owners don’t have time nor interest to deal with some political issues, many of them believe that politics does have an impact on their business and can be a source of their problems.

Many small businesses’ worries are connected with the cost cluster, among them, the most difficult to control are health insurance costs, energy costs and inflation. Other cost problems are connected with the costs of fuels and electricity, supplies, inventories and worker’s compensation insurance. An American economy used to provide a good, stable foundation for small business owners, but lately it had a negative turn, resulting with small businesses struggling to search for innovative ways to reduce expenses and increase sales.

Speaking of problems with taxes, we are talking about federal taxes on business income, property tax (real, inventory or personal property), tax complexity or state taxes on business income. Obviously, most of the high ranked problems small business owners deal with are connected, this way or another, with some general issues or a state. The only way to deal with those difficulties is to be well informed and to have a good strategy. Never underestimate the importance of a good small business plan.

Still, there are some concerns more locally oriented, which are connected with the organization within the company itself. There are, of course financial problems, which could be solved by careful and professional managing and a special emergency bank account with some money saved on regular basis but used only in tough months.

The survey also showed that some of the everyday headaches a small business owners may have, come from their near surrounding. For example, incompetent employees which can give company a very bad look. In comparison to large companies, small businesses have a high employee turnover, and reliable and trustworthy employees are a great challenge.

Maybe the most serious problem of this kind is a relation with suppliers. Most of the businesses are sort of net or chain of services and goods, and a flue of the money, so one business works as good as is the functioning of business deal with suppliers or other company you cooperate with.

5 Most Common Small Business Financing Requirements

Small businesses are the backbone of our American way of life. Yet more small businesses are failing than ever before. Granted, the economy is still in rough shape, even though it’s appearing to slowly improve, but this isn’t helping the small businesses stay open. While the recovery may have gotten to Wall Street, it hasn’t yet made it all the way to Main Street. What drives most small businesses under is a lack of immediate cash flow which could be handled with a small business loan.

The main drawback to this is making sure the business is going to be able to pay back that loan. In order to qualify, there are several requirements that small businesses have to meet. Here is a list of a few:

1. There has to be a business plan in place. Either the original business plan if one was developed, or one to plan out the uses for funds and the projected financials based on the loan.

2. If at all possible, collateral will need to be posted for the loan. This can be equipment, machinery, land and building or anything else of value. Having collateral gives the bank or finance company something to put a lien on in case the business still fails.

3. Business credit scores need to be good. These scores are used just like personal scores are and can affect the amount or availability of small business financing. Check these before trying for a loan as each check by a lending institution affects the scores.

4. If the business is a partnership or has multiple partners, anyone who owns more than 20% may have to have a personal score of 680 or higher. Check these as well.

5. Each lender will have different requirements that will need to be met. The best way to make sure you’re covering all your bases is to check with the lender first and see what those requirements will be. That way you don’t go into the loan process and have issues because a step wasn’t prepared for. This lack of preparation will cost you time because you’ll have to go meet that requirement before the process can continue. And that may be time you don’t have.

Also, make sure what type of small business loan or financing you really need. There are 5 basic types and each are geared for a specific set of needs. Do the research and make sure you’re looking at the right type of loan, otherwise you may undercapitalize and will wind up in the same position you’re in now. Take your time and make sure you’re efforts are going to lead you to success.