There is a valuable resource available to all small businesses available through the United States Small Business Association or the SBA. They are easily available in many community colleges and state funded educational institutions for personal appointments to assist new business start-ups with the entire process of mapping out a business plan. This is essential for a small business to anchor down exactly what the product is, the mission of the company, the budget and scope of the endeavor and how it will be mentored and financed.
It is possible to learn the entire process by a self study online course available on the SBA dot gov website. There determinations are made regarding the main objectives of their course work which are:
Determine financial needs
Identify options for financial assistance
Define each option fully
List plusses and minuses of each option
Every business must have working capital to operate and meet payroll. This must all be in place before any business loan can be procured. Still, the business had to get funding for business to start in the first place. Making an assessment of the businesses’ most current financial statement is necessary. The other most important step to take is to compile a detailed business plan with projections for the future of the business and where it expects to see itself in five years. To learn this the questions to ask will reveal this information.
Assess Need for more Capital to Manage Cash Flow
Has it been difficult to make payroll or pay the bills for the business? This will determine if an infusion of working capital is needed to keep the company solvent.
Asking what is the nature of the need will also help to learn if the business is expanding or shoring up against risk. The urgency level is also important to discover. While the problems are still small, it is best to anticipate them before things get too difficult. If things are already in jeopardy, then the company may struggle to get approval for funding. Being prepared for financial crisis is better than trying to obtain funds after crisis has already hit.
Asking the questions that reveal what stage the business is in will also enable the company to specifically prepare to receive funding for the stage of either start up or of expansion. Lenders also want to learn about the specifics behind the need for the loan. This will reveal where the money will be used. The questions asked will also reveal what circumstances will provide the best chance for the business to thrive. The lender will also gain assurance that they will be paid back.
The financial assessment should also answer the question about the current state of the industry. Is the industry depressed, solid or unstable, or even fast growing. Learning the business stage such as if it is seasonal or cyclical will also be very useful. Knowing this will determine if the company should take small loans with short terms. If a business is cyclical such as the construction industry, then the loan can be a very short maturation and repayment cycle as well. This can stem off the cash flow difficulties of businesses that have unpredictable cycles.
The banks and lenders also will benefit from information about the management team of the business. They will favor the business that shows strength in their management team. Hopefully, the business has strong evidence also that its need for financing is carefully intertwined with a detailed, well thought out business plan.