Jim Blasingame

Business futurist, award-winning author, speaker and columnist

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Archives for October 2018

Are you ready to ask your banker for a loan? Part II

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As mentioned in the first of this two-part series, most businesses deleveraged during what I call the Main Street economy’s Lost Decade — 2007-2016. That means they paid off debt and didn’t add any.

So those folks — possibly you — can be forgiven if they’re a little rusty at asking a bank for a business loan. But as the current economic expansion picks up, and you need growth capital to respond to the new opportunity, it’d be handy to brush up on some banking skills.

Last time, I revealed the first three of six loan request questions. Getting comfortable asking for or discovering the answers will improve your chances of getting a loan approval. In case you forgot, the first three are: Who decides? What do they need? How do they want it? Now for the other three.

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Are you ready to ask your banker for a loan? – Part I

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The two elements that define the term “deleveraging” are: stop borrowing and pay off what you owe as soon as possible.

During the period I call “The Lost Decade” — 2009-2016 — this practice was an essential survival fundamental for millions of small businesses. Indeed, across Main Street America, survey after survey since 2009 revealed small business owners reporting emphatically that they neither wanted nor needed a business loan.

Even during the past two years, as economic expansion has finally taken hold, polling has indicated most small businesses have funded growth with their own retained earnings which, by definition, is a product of deleveraging. But as the economy continues to grow, organic capital eventually runs out. And if you’re going to take advantage of sustained expansion opportunity, funding for most small businesses means, ultimately, a bank loan.

The good news is banks are standing by, ready to lend. Especially community banks, of which I’m an unapologetic, unabashed champion. The other news is that since it’s probably been a while since you’ve approached a bank for a loan, it’s probably time to brush up on some of the fundamentals of having a successful banking relationship.

Consequently, I’m going help you get back up to speed on six key questions you need to answer. We’ll cover three this week and the rest next week.

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What’s good for small business is good for the world

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Americans are afforded a privilege which, while not rare, is certainly unavailable to billions of other Earthlings: We’re allowed to vote for those who represent us in government.

The words “privilege” and “allowed” are used with a purpose: The U.S. Constitution gives Americans the right to vote, but does not require us to do so. If voting were a legal requirement, in the 2000 election 100 million Americans could have been arrested, as pundits lamented the “Vanishing Voter” phenomenon.

But by the 2016 election, voter turnout had transmogrified from apathy to engagement with a record number of ballots cast – 137.5 million. Indeed, we’re experiencing one of the most promising phenomena of the current age: increasing fervor and investment of the American electorate in the political process.

Nothing bad happens when Americans get fired up about the political process, regardless of whether a voter spins to the left or the right or marks time in the middle, because taking a political position typically manifests in a more knowledgeable voter. And the best way for America’s challenges to be addressed is for those same voters to require political representatives to stand up and serve with leadership, rather than slouch with the self-anointed political class.

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What love and patience have to do with negotiating

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Negotiating is a process of communication between two or more parties to reach an agreement on future behavior—like when you’re purchasing a small business, leasing an office, hiring an employee, selling a product, or trying to get a two-year-old to take one more bite of peas.

Let’s look at the two key words in that definition: process and communication.

Process

Conducting a negotiation is more like running a marathon than a sprint—it takes time and involves multiple steps. By accepting this reality you’ll set yourself up to be more patient and, therefore, more effective. 

Remember, your impatience with the process is the other party’s best leverage. Good negotiators practice patience.

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America’s small business segments – by the numbers

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According to the Small Business Administration, there are 28 million small firms in the U.S. On its face, that number proves that small business in America is actually quite big. Indeed, as I’ve proudly pointed out in this space for the past 20 years, the small business sector is responsible for creating half of the U.S. economy, and employs over half of all private sector employees. Nothing diminutive about that.

Just as it’s instructive to segment big businesses into categories, it’s also handy to put that 28 million number into perspective. The prime calculation divides small firms in two, 80/20: 22 million individual operators with no employees, and about 6 million entities with between 1 – 500 employees. Five hundred is the SBA’s line between large and small business.

Speaking of employees, it’s more than noteworthy to recognize that almost 90% of small employers have less than 20. And not to take anything away from larger small businesses, but that greatest cohort of small employers represents the big gear in the Main Street economic machine. And it’s the posterchild for capitalism writ small: a locally owned, family run business, providing income for several community residents, while likely being perennial supporters of non-profit entities that round out the rough edges of every community. Oh, and those owners know the names of all their employees’ children.

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