Hard Money Loans

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I am frequently approached by business owners seeking financing for their companies. It’s become a love-hate scenario. I love it because that’s what I do, arrange financing for small businesses. I don’t enjoy it as much when I soon realize that the business owner often doesn’t know why they need the money, how the money will help their business, or if they can afford to take a loan.

I’m surprised at the number of business owners that haven’t taken the time to determine how they plan to use the money. Most of them believe they need to do more marketing or buy more equipment, but they haven’t figured out their estimated return on investment or what they really expect to get in the end. There are 3 quick planning and analysis steps every business owner should perform before seeking to take on a loan or other commercial financing:

1) Analyze your current situation to determine the problem you’re trying to solve. This may differ for start-ups versus established businesses. As a start-up, you may be seeking financing to lease equipment to get the business operating or advertising dollars to notify your target market they need your product or service. Established businesses will generally say they are looking to increase sales. This may seem obvious but it really takes self-inspection. It’s hard for me to say it, but throwing money at every problem you encounter doesn’t always give you the resolution you need. Is your biggest problem really lack of sales or is it lack of efficient operations? They are two vastly different problems and require different solutions. Once you clearly identify the problem, without trying to solve it first, only then can you determine possible effective solutions.

2) Set a path to achieve your identified objective. If you’re seeking more efficient operations, review your current operating plan to see where the bottlenecks occur, what areas generate income and which are high cost activities that contribute little, if any, to operating revenue. Review and revise as necessary, cutting back on non-essential functions. Revise your operating hours, shift your marketing focus or mediums, plan to update your software or equipment. Hire or reduce your staff. All of these measures can help you become more efficient, automate operations and increase sales, depending on your specific needs. You should now be able to determine an expected percentage increase in sales, revenue, target market exposure or decrease in operating costs or whatever your objective is. If you can’t measure it, how will you know if you ever achieve it?

3) Understand the costs. Having completed the first two exercises should bring you to the point of recognizing reasonable costs for you to incur when implementing your plan. If your plan reveals you need additional cash flow or upgraded equipment, educate yourself on the cost of obtaining these financial products. Different financial products have different costs associated with them and different payment structures. You can expect convenience products, those that require relatively little financial paperwork and put cash in your hands quickly, to be more expensive. This is not to say that you shouldn’t consider these products, they may be just what you need, especially if your other options are limited and the cash will ultimately save, if not increase, your business. Cash advances can be expensive, but if they allow you to make improvements to operate more effectively, make the payroll deadline, purchase materials to fulfill a large purchase order, or increase your overall sales by 30 or 40%, then you have experienced an excellent return on investment.

Don’t be too quick to run asking for loan. Take the time and put in the effort to craft a plan to understand your needs and then select the best solution for your situation for today and six months from now. It will be worth it in the long run and you’ll feel more confident about your decision if you do pursue a loan. As always, an educated business owner is a successful business owner and a preferred client.

Marian White is the owner of The Grey Financial Group, LLC, a commercial brokerage firm serving small business owners throughout the United States. http://greyfinancialgroup.com/