Answers are easy. Asking the right question is hard. Over twenty years I have developed a skill for asking questions (to the dismay of my wife and family but that’s for another post). Many businesses get really good at delivering their particular product or service to the market but can experience challenges or problems that end up redirecting their efforts and sometimes causing them to lose sight of what they were trying to achieve in the first place. This past week I had the chance to have a coffee with an individual have known for many years who has had his fair share of challenges but like any good entrepreneur he used his lemons (bad circumstances) to create lemonade. Now that the moments of desperation are somewhat behind him he was looking to get himself on better financial footing and wanted some input from me. I asked him #OneQuestion that changed the rest of our conversation and ended with him sending me a lengthy email with all of his answers. I asked him:
“How much money does your business need for it to do more?”
Let’s face it. Entrepreneurs and business owners are always looking for money. I find it interesting that many folks running a business who need money don’t take the time to really understand how much money is actually out there and available to them. When words like “money, financing and capital” are used they can cause someone’s eyes to glaze over as these terms are associated with confusing and uninteresting concepts. The truth is that money can be complicated and boring to understand but it doesn’t have to be.
Matt Horne, Founder and CEO of DECO Windshields chatted with me yesterday in a Google Hangout about all things business finance. Matt has built a company that generates over $5,000,000 in revenue and had lots to say about money, business and the learning curve that he has had to go on to keep the doors open while dealing with massive growth. He used a term – “fringe bankers” – to refer to capital groups in the market that have been able to help DECO with their cash needs. I like the term and think I will be adding it to my vocabulary.
Talk to any banker, lender, mortgage specialist or broker about paperwork and one of their biggest frustrations would be “when clients send me their information in bits and pieces over dozens of emails and faxes”. It’s amazing that everyone needs access to the documents and information associated with a borrower but there is no streamlined system or platform for everyone to use to easily share their information other than email messages, faxes and plain old fashion photocopies.
I was reading the results of a survey conducted by the Business Development Bank of Canada (BDC) that highlighted three main reasons why companies seeking financing were not able to obtain the loan they wanted. In my experience working with businesses to secure debt financing I agree with the reasons and would suggest an additional reason that supersedes them all.
Many small businesses have a hard time with technology. A hard time understanding what technology they should be using as well as a hard time staying up to date on the changes happening in the marketplace with technology that could be helping their business do more. Believe it or not the Government of Canada has a technology financing program that your business may be able to benefit from.
“I own a business and we need some money, can you help?”
“What do you need the money for?”
“Oh lots of things…”
“How long do you need the money for?”
“Maybe 6 months to a year”
“How will you pay it back”
“Well we are having a really good year and just seem to be a little short so we need to borrow some money to get over the hump”
This is the most common conversation I have with small businesses who are looking to borrow money. They do not always know exactly why they need money and are not able to articulate how they are going to pay it back. The most popular business loan request we get is for a business line of credit. The problem is that a business line of credit usually means “working capital” (see blog here). Working capital (and lines of credit) are very difficult to get.