Jim Blasingame

Business futurist, award-winning author, speaker and columnist

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Investors

Searching for investor capital? Don’t make these mistakes – Part I

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This is the first article in a two-part series on how to maximize your chances of success when approaching an investor for your business.
One of the modern marketplace myths mouthed by talking heads and politicians is that small businesses don’t have enough access to capital. You could write a book about what these people don’t know about small business.

It’s true that capitalizing a startup isn’t easy. Here’s some non-breaking news: funding a startup is supposed to be hard. But if you have a viable business model, a performance track record, can justify future performance, and are creditworthy, capital sources will come and play in your backyard. But remember the Marketplace Golden Rule: “He (or she) who has the gold, makes the rules.”

Before we go further, let’s identify the four primary sources of small business capital:

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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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Blasingame’s 3 Laws of Small Business Capital

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The first sentence in the job description of every CEO should be, “Secure and manage the capital your company needs.” 

Webster defines business capital as, “any asset, tangible or intangible, including cash and hard assets held by the company.” Capital blended with operating cash flow becomes the financial fuel your company’s engine uses to operate with and fund growth.

A small business has three primary sources of capital:

•  Investment Capital — money or assets from you or someone else

•  Retained Earnings — profit you created and had the discipline to leave in the business

•  Borrowed Funds — for most small businesses, from a bank loan

Every once and future small business CEO must be able to deal with capitalization issues, including the three prime capital fundamentals.

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