Admit it. Either you or somebody you know has had that experience of getting excited to go on a date only to be more than disappointed. It wasn’t the event that they went to or the restaurant they ate at or even the conversation – it was usually the let down from the over promise of what they were expecting from the date. In the past week I was reminded that going on a bad date is like working with a bank to get a mortgage or loan. Banks have many layers of people and systems that need to work together in order to lend you the money you are looking for. A bank manager may genuinely have good intentions when they tell you “yes we can take a look at your request” only to tell you later “sorry our credit department has declined you”. What a let down. I did some research to see how people avoid going on bad dates to see if there were some ideas I could borrow when helping people (and businesses) work with a bank.
Let’s face it – $1-billion dollars is a lot of money. Reaching a value of $1-billion dollars is a lot of success. Being a Canadian company that is worth $1-billion dollars is a huge achievement that not many companies reach. For those of you that do not watch or pay attention to technology you should know that Canada has a massive success story in a company called Shopify Inc. (click here for their website). If you want to be a retailer selling something online – you are either using Shopify or should be. Shopify is everything you need to set-up an online store and they have over 80,000 customers in more than 80 countries. They just raised $100-million dollars to pay for more growth and to capitalize on new opportunities. Great news for Shopify but what about your business?
One of the big headlines today is that Canada Post is eliminating doorstep delivery and cutting up to 8,000 jobs in an attempt to make a dent in the $6.5 billion (yes billion) dollar pension shortfall. Imagine the problem the government would have on their hands trying to figure out how to solve that problem while keeping the population happy about getting door to door service! The comments and debate is interesting but misses a key point – when a business is not covering their obligations they are bankrupt. It’s simple. As any small business owner or individual can attest, you cannot keep ignoring your bills forever – at some point the music stops. Here are three common responses from businesses I talk with about their costs exceeding their cash:
As a mortgage broker it seems over the past few years that more people come to us at the 11th hour needing money at the last possible moment. I remember when I first started brokering and the amount of lead time that was available for most deals. Three to six weeks was a normal timeframe to get a deal packaged, approved and funded. These days it seems like three to six days is a normal timeframe for getting a deal funded and completed. Borrowers need money quickly and seem to have less time for wasting time. If you find yourself in this position, here are some things to keep in mind as you go out and hunt for money:
We recently completed a mortgage for client that was refinancing his property to get a larger mortgage and use the additional funds for investment purposes. The bank that he was looking to pay out had a clause in their mortgage that basically read “you cannot payout your mortgage unless the property has been sold”. This means that the bank would not allow the client to payout the mortgage unless he produced a sale agreement showing that someone unrelated to him was purchasing the property. Needless to say the client was extremely upset and couldn’t believe this clause was not explained to him when he took the mortgage.
With Christmas around the corner, many businesses may be getting ready to wind down for the year. Amongst the Christmas parties, cheer and celebrations make sure you take a moment to think about what happens after Christmas. Is the first part of the New Year your busiest time or is it at some other time during the year? No matter when it is as your business gets back to business in the New Year here are some things to think about:
In continuing with the theme from yesterday’s blog (click here) here are some ideas on how to prepare for the cash your business may need. Keep in mind that one of the unique features of a small business is it’s ability to be nimble and change quickly. Any plan for more than 12 months out could be nothing more than a guidepost in helping steer the overall strategy of a business. At ground level, cash flow matters and having a plan for the coming business quarter or quarters can relieve pressure.
“Capital support” is a term I use to figure out how a business can access the capital they need to support their activities. Many businesses owners wouldn’t consider “capital support” an item that they would specifically and intentionally address as they manage their cash flow the best they know how as capital is needed. Taking some time to consider the sources of capital that your business has access to can help you plan your cash flow and reduce the amount of time and effort spent trying to scramble at the last moment.
What do you think? Generally speaking, is Canada risk adverse? Many of my recent blog entries have detailed different aspects of Canadian banks and lenders being adverse to any kind of default risk which may have served us well during the last downturn but today may be responsible for minimal economic growth within the small business market. I appreciate that the TSX has demonstrated that it can raise risk money for oil and gas but what about other industries? Is there a general sense of “no risk here please” in Canada?
Who in their right mind would want to work 24 hours a day 7 days a week and worry about money? Entrepreneurs that’s who! It seems counter intuitive that someone would be prepared to work hard and still get anxious about money but the truth is that many small businesses do spend a lot of time dealing with money issues and challenges. This is for a variety of reasons with the main reason being a lack of knowledge about finance and it’s importance.