Steps to Obtain Business Credit and Capital For Your Small Business!

Small businesses are extremely important to our culture and our economy, especially in the current economic challenges we face as a nation. In fact, small businesses make up a very significant portion of our economy. The financial success of America’s small businesses lies heavily on their ability to attain credit in order to maintain their business. It is shocking that nearly all small-businesses fail in their first months or years of business. One of the primary flaws is how business owners do not start their business on the proper foundation to put their business in the best position to obtain cash and capital.

Another problem is the way people run their businesses is being lax when is comes to book keeping and cash flows. However, taking some steps to alleviate and deter credit problems can ensure a continuous supply of capital and will more than likely put the small business owner in a position to succeed!

The first step is to stop using your personal credit cards to finance your small business. That means form a corporation or LLC (not a sole proprietorship) and obtain a business credit card in the name of the corporation or LLC. Yes, the debt will be personally guaranteed but the debt will not affect your personal revolving debt ratio!

It is very important to keep your personal revolving debt on your credit cards below 30% or less. This will put you in a better position when you work with the banks and other business credit resource to help your business to obtain cash and capital. This is very different than business trade credit which is a different strategy. Separating your personal and business credit also has been shown to improve cash flows and maintaining accounts. This allows you to increase your credit and even help you save cash.

Different kinds of credit are needed for all business owners and you should know what you need. For example, if you are running a major office based business with many supplies and office employees, you may need a forty thousand dollar line of credit with Office Max. But if you run a small business from home your line of credit may come from the bank that you do business with. Either way, lines of credit are like cash, they increase your assets and help the success of a business.

You may even use a line of credit to directly give you cash, say to pay for marketing expenses or office space. Either way, these are all things that ultimately benefit your business. It is important for businesses to have capital, especially if they have these other lines of credit. This is because you cannot use your line of credit with Office Max to pay rent or payroll expenses.

If you have a corporation, you may be eligible to receive a lot of money in credit, if you follow the proper steps (even in today’s tight credit markets). This is very important for new businesses because they need to have significant amounts of capital to remain in business. Often times, companies that are incorporated can get one hundred thousand, five hundred thousand, or even one million dollars in credit limits, which is a great start up amount of money.

New small business owners should be sure to increase their chances of getting capital and should consider the benefits of separating personal and business accounts. This should be done for the sake of organizing cash flows, increasing capital, and ultimately increasing revenues.

Top 7 Tips For Business Owners and Managers

None of us have all the answers when it comes to running our own business. It can often be a lonely place, particularly when business is not so good. However, you do not need to go it alone as there are plenty of options for help and advice. It is worth considering one or more of the following tips to help you gain perspective on your business and maybe get a little bit of external help through difficult times.

1. Join a small business network
2. Visit online small business forums
3. Consider getting a management consultant or business coach on your team
4. Invite retired business professionals to sit on your Board
5. Seek a mentor in a larger company to oversee your progress
6. Talk to your small business banking specialist
7. Go it alone but harvest best business practices from article publishing web sites

There are loads of different small business networks out there that are formed to provide a platform for other small business owners, like you, to help each other. The reality is that many businesses will be experiencing the same challenges as you and some of them will have already addressed your particular problems in relation to their own business. Conversely, you will have solved some of the problems that other business owners are experiencing. This sharing of experiences, information and support is hugely beneficial and membership costs are minimal.

Some of us are not joiners by nature and would prefer to avoid breakfast meetings in the early hours of the morning. Therefore, a more suitable option may be to join one or more online small business forums. This can be done on a semi-anonymous basis and you may choose to use the forum as much or as little as you desire. It provides the same type of support as small business networks and can be a bridge to interacting with other business owners with similar challenges to yours.

Hiring a management consultant or business coach does not have to be a hugely expensive endeavour for your business. You can start with a short term contract to have him/her visit with you once per month to act as a sounding board and to help chart your ship through rough waters. If he/she has done work in your industry segment before there is a huge value added component that can be brought to the table.

Many successful retired business people in your area may be chomping at the bit to get involved in something new. After all, there is only so much golf they can play. The value they can bring to your business is enormous and their business connections could transform your business. Talk to some of the retired executives in your locality and invite them to get involved.

Some of the larger businesses in your area may have a strong community spirit and want to give something back to the community. You will know the good ones from local newspapers and magazines. Contact some of them and invite one of their senior executives to work with you as a mentor to your business.

Bankers have a bad name in the current economic climate but there are many specialists dealing with small businesses that have tremendous experience in advising companies like yours on a whole range of business issues. Chances are that they have seen your type of business issues before and can offer advice. This service is usually free.

If your personality type dictates that you still want to go it alone, that is okay. You can simply visit many of the online Ezine websites that offer a diverse range of free articles by business professionals. You can learn many new tricks and perhaps find answers to whatever business issues are facing you.

How to Sell My Business – The 7 Biggest Mistakes Business Owners Make When Selling Their Business

If you are a business owner, there will come a day when you look at “how to sell my business” as the main question you ask yourself and perhaps the first thing to type in the search box in Google or your favorite search engine.

When you type in “how to sell my business” I am sure you will find all kinds of information on just that. I have compiled 7 of the things most business owners don’t know about or don’t think about before that day (or the day of) that would certainly make the day you do sell your business a more profitable one.

Most companies who visit with us are looking to find out what their business is worth first. Most business owners have no idea what their company is worth. Wouldn’t you like to know about what it is worth before you hire a broker (we’re not brokers, by the way).

Before I go into all that let’s look at the 7 biggest mistake business owners make when they get to the point of asking “how to sell my business”

1. They assume they “know” what their company is worth and make up a price – Look the first problem with this approach is that your business is usually “your baby”. If you have owned your business for a long time you know that you have spent more time with it than perhaps even your family, spouse and kids! It’s always there, even in the back of your mind………and sometimes it is hard to understand why someone can’t see your business worth the way you see it. That’s okay, but it is better to have a certified 3rd party give a certified opinion or appraisal of your business.

Look at it this way, if you and I were going to go downtown and buy the Hilton Hotel, we would find a qualified appraiser to give us his professional opinion, wouldn’t we? We certainly wouldn’t take the owner’s word for it or even their accountant’s word for it. We would want an independent opinion and official analysis.

But you say, hey my business isn’t worth that much to justify the cost. What? Even if your business is only worth $25,000, at least you would have an official 3rd party appraisal and a “floor” price you could start at. And with the discounts available when you go through someone like, you could literally add thousands if not tens of thousands to your sales price, and only pay a small percentage to have it done.

I would not even consider selling any business without this step, no way, ever.

You see, most business buyers are smart, like you, they have done a lot of right things to get where they are and unless they have recently inherited the money, they are sophisticated to a degree and will do their homework when looking for a company to purchase. The real advantage to having your company appraised first (by an independent 3rd party certified appraiser) is that you are the one driving the appraisal, not the buyer.

2. They ask their accountant what their company is worth and use that number – You accountant is probably a very smart individual, however when coming to valuing a business or having one in on the sales process, I have one rule. I make sure they have been in on at least 10 business sales in the past 12 months, no exceptions. I have seen more deals killed by well meaning accountants. Don’t make this mistake.

I don’t care what your accountant thinks your business is worth. I don’t care what MY accountant thinks your business is worth. I want to know what the market tells me. So that’s why I want an independent look from a qualified third party to tell me the current “market value”. I have seen hundreds of business owners make this mistake and it can (and has) literally meant the difference of getting only half of what they could have! Half!

What’s also most interesting about accountants is that they tend to favor using the book value of your business as a starting point and not the market value. Big big mistake. You’ll leave a ton on the table this way. Don’t do it!

3. They take the number off their balance sheet and say that’s what their company is worth – You balance sheet tells you the hard value of the assets you have, that’s it! It doesn’t take into consideration what the value of your assets are that have already been depreciated or your blue sky value, or good name, or customer base……….all things that can add tremendously to the bottom line value of your business!

4. They read a few articles in INC magazine and guess a number (even saying something like “companies in my industry are selling for 3 Times earnings”) They may even refer to their latest tax return for a number – Don’t be fooled by this! There are so many variables even with similar businesses in the same industry. The true value of your business is NOT the same as the guy down the street, even if you do the same thing!

The true value of your business is NOT like real estate, where you can compare with the property down the street.

That is like saying the space shuttle is like a bicycle. True they are both forms of transportation, but one is a bit more complicated than the other. Again, have it appraised by a “market appraiser”. Best money you will EVER spend. Ask ANYONE who has EVER sold a business!

5. They trust a FREE tool on the internet to give them the value of their business - While these free tools are valuable to help obtain a “range of value” (we have one too), they are not the complete answer and you can’t use them to justify your asking price. If you have a properly done market appraisal, it will include a “justification of purchase price” section that says, “this is what your business is worth in this market, and here is why it is worth that”

That is such an important step. Buyers are smart and want to know how you came to the price you did. Now you know what to do so you can stand behind your price. Plus you will know just what the market is doing. It isn’t the accountant or the balance sheet or your uncle attorney that dictates the price, it’s the market! So knowing this, it is important to know just what the market price is. I have seen market prices be twice what the accountant says the business is worth!

6. They haven’t made their business run without them – This is a no-brainer, yet many business owners don’t think of it. Your business will be worth a lot more if it can run without you there. Otherwise whoever buys it will be buying a “job”. Nothing wrong with that, but realize, those businesses just are not worth as much when you go to sell them.

7. They hire the wrong attorney to help them with the final paperwork (the wrong attorney could be their best friend) – This is just like the accountant, unless the attorney you use has closed 10 or more deals within the past 12 months, don’t use them! So many well meaning attorneys have killed countless deals, UNNECESSARILY!

I wish you well and hope you take these things to heart (and action). I have seen so many sellers walk away with a lot less than they could have, had they JUST used these few tips!

Good Luck, I wish you continued success! (don’t forget to get a certified third party, independent report for your business BEFORE you list it to sell) You’ll be glad you did!

Buying a business? Use the same concepts!