Cracking the Code to Secure Finance: A Small Business Survival Guide
What’s the Real Deal with Securing Finance?
“Secure finance” – if you’re knee-deep in the world of small business, you’ll hear these two words all the time. It’s the golden ticket for every American dreaming of entrepreneurial success, whether you’re itching to launch a new venture or already running a small business. But for many, achieving this golden ticket feels more like a rough trek uphill than a walk in the park (see also our article on the 5 challenges that small business owners face).
The Problem: Roadblocks in the Pursuit of Secure Finance
Let’s break it down. As a small business owner, you might initially see secure finance as simply getting hold of the money you need. But here’s the catch – it’s not just about getting funds. It’s about getting the right amount, exactly when you need it. It’s about keeping your business ship steady even when economic storms hit.
Here’s the nitty-gritty. Many lenders, like banks, tend to give small businesses a wide berth. The idea of lending to these smaller players seems a bit too risky, considering their shorter trading history and the lack of enough collateral. The stats say it all. In 2021, the Federal Reserve’s Small Business Credit Survey revealed that only 31% of small businesses received the full financing they applied for – this is even 20% worse than 2019, when 51% of companies applying for funds received the full amount .
But there’s another piece of the puzzle. Many small business owners are wizards at what they do, but when it comes to the world of finance – they’re novices. This lack of financial savvy can create stumbling blocks on their journey to secure finance, often causing them to miss out on viable opportunities.
The Solution: Tackling the Challenges Head-On
But hey, it’s not all doom and gloom. Just because it’s tricky to secure finance doesn’t mean it’s a lost cause. Here are some practical steps to turn the tide:
1. Arm Yourself with Knowledge
Your first mission? Get clued up on your options. Understand the financial arena you’re stepping into. From bank loans to crowdfunding and venture capital – each has its pros and cons. It’s up to you to decide which is the best fit for your business.
Did you hear of Anna Sorokin? That girl that posed as a wealthy German heiress in the USA? When asked how she got that much funding from banks, bankers admitted that “she spoke banking language”. It sounds crazy but that makes a difference as you see in this example. So equip yourself with this kind of knowledge before asking for funding.
2. Build a Rock-Solid Business Plan
A foolproof business plan can be a real game-changer. It should showcase the ins and outs of your business – from your operations and market analysis to financial predictions. This is your chance to impress potential investors and prove you’re all in for the long haul.
3. Clean Up Your Business Credit
Having a clean business credit score is like having an ace up your sleeve. It can be a real deal-maker with lenders. To keep it squeaky clean, make sure you pay your bills on time and routinely check your credit report for any hiccups.
4. Step Outside the Box
It’s time to think outside the traditional banking box. There are other players on the field, like online lenders, crowdfunding platforms, and peer-to-peer lending. They often have a more flexible playbook and could be good substitutes if your business is still finding its footing.
5. Use What’s Already There
Last but not least, make use of the resources available. The Small Business Administration (SBA) and local organizations often have microloans and grants up for grabs. These can be real life-savers for women, minorities, and veterans in the business world.
The Endgame: The Journey to Secure Finance is a Long Road, Not a Short Sprint
To wrap it up, secure finance might seem like a mountain you can’t conquer, but with a little know-how and a lot of tenacity, you can reach the summit. Remember, the journey to secure finance isn’t a one-and-done deal. It’s an ongoing process that grows and evolves with your business. So, keep your eyes on the prize and your spirit high. Every step you take today towards secure finance is a step towards a brighter, more prosperous future for your business.
 Federal Reserve Banks. 2022. “Small Business Credit Survey: 2022 Report on Employer Firms”. https://www.fedsmallbusiness.org/survey/2022/report-on-employer-firms