There is a reason there are more than 25 million Americans who are starting or growing small businesses at any given moment. The idea of working for one’s self and building a successful enterprise is a vision shared by a great many people. For those who pursue their dreams, the journey is one of conflicting emotions and experiences. It is an effort that is exciting, yes, but also demanding, and sometimes overwhelming. If you stick to it, however, it can also be very rewarding.
Pursuing Your Dream, Building Your Team
America has always relied on creative and hard-working people who share the dream to build their own business. These, in turn, have created many jobs and opportunities that have helped the nation grow. If you are thinking of becoming an entrepreneur, you may be intimidated by the idea of undertaking such a challenge. On the other hand, you may also be someone who has already started your journey to build a successful company.
In either case, one of the first and most important lessons to learn is that you do not have to undertake the journey alone. In fact, it is essential for you to assemble your own success team to assist you in your efforts. Finding and working with the right people such as those at Forward Progression Development will often make the difference in achieving success or failing to meet your goals.
The Vital Role of Capital
There are many different requirements for different types of businesses and ventures. Your skills, experience, knowledge, and current market trends are all factors. However, the one common challenge faced by all startups and growing businesses is that there is a constant need for capital. That is the financial fuel you must have to keep powering your company’s growth. This makes the process of proper small business financing important to your planning and potential for success.
The capital you need will come in many forms, including debt and possibly outside equity. For most startups, you will personally provide the initial business financing. According to an article in Entrepreneur magazine, the largest source of funding for startups is personal savings and credit, not business financing. The degree to which you can personally support your launch will be based on your own credit score.
When you start out on your venture, your personal credit score is your business credit score. Lenders will look to this as the source of their confidence for extending credit. That fact makes it important for you to present the best possible picture of your creditworthiness. This reality means your options with a score of 670 to 800 will be much better than if you are in the 580 to 699 range.
What Determines Your FICO?
When lenders refer to your credit score, the most common understanding is the numerical FICO score reported by the leading credit agencies. The three most important of these agencies are Equifax, Experian, and TransUnion. Knowing your FICO and how it is computed is essential to evaluating your access to business financing options for your business.
The exact method of arriving at individual credit scores is proprietary to the Fair Isaac Corp. However, they do publicize the five primary categories and how they are weighted. These include:
- Type of credit (10 percent)
- Amount of new credit (10 percent)
- Length of credit history (15 percent)
- Total amount owed (30 percent)
- History of payments (35 percent)
Each of these factors plays a role in showing a lender how you might handle the debt you will accrue via the loan are seeking from them. At Forward Progression Development we help you understand how to maximize your attractiveness to such lenders. While we cannot directly improve your score, we guide you in taking the necessary steps to accomplish that goal of securing your small business financing. We gain your trust with the advice we provide, and you then use that guidance to achieve the results you desire.
Cash: The Lifeblood of Every Business
When you work with your advisor at Forward Progression Development you will learn why cash is such an important aspect of your business. Even the largest corporations must manage cash well, and that discipline is all but essential for a startup and small companies.
One of the first things you will learn is cash is not profit, and profits are not cash. When we help you assemble your business plan to secure business financing, you will prepare projections and models about your expected performance. These are different from the personal cash flow you might use as a budget. The projections you create will use assumptions that show what your profits, cash flow, and balance sheet will be at different stages of your company.
The cash flow statement will be a key point of evaluation for any lender. We excel at helping you work through the details of how to create a realistic and convincing document for presentation to potential lenders. Feeling intimidated or perhaps overwhelmed? Don’t worry, that is totally natural. You should even be glad you understand how important this process is to your success at securing your desired business financing. We help to build your confidence in this area and eliminate your anxiety. You can get a free glimpse of how we work to make this an achievable goal by checking out our free business builders.
Sealing the Deal with Collateral
You may face credit challenges or need a larger loan than your personal credit statement will support. If so, you might be able to attract more lenders and better terms if you are able to put up quality collateral to secure the loan. If you should default on a loan, the lender can liquate the collateral to regain the money they advanced. Since this takes some of the risk out of the deal for them, they are often willing to loan more or provide more attractive interest rates or other terms.
Balancing the equation of collateral, amounts borrowed, and the terms negotiated for your small business financing is a complex process. Once again, our team at Forward Progression Development is both highly experienced and fully committed to the process. We work with you to ensure you have the most favorable business financing options possible after balancing all the factors affecting your specific situation. This includes deciding if you should put up collateral and, if so, what collateral under what terms.
Key Takeaway: Your plan for business will spell out in detail your business financing requirements. This will detail how you intend to use your cash and capital. This is another balancing act that calls for you to conserve your capital and cash carefully. We can help you understand, for example, that it is often much wiser to lease or even rent a piece of equipment you need instead of purchasing it. Each situation varies, but conserving capital is always a sound rule to follow.
Your New Story Starts with Your Current Story
While that sounds a little odd, you are writing a new story when you start and grow a business. How that story will develop depends a great deal on how you came into the venture. You must be upfront with all the personal information that tells your story. Whether it is your contact information, references, or work history, you want to work with facts. Concrete information is the best starting point, and you should avoid trying to spin any of those facts in an unrealistic or less than straightforward manner.
We start with our clients by reviewing these facts. You can trust our team to help you develop the package that tells your story and shares your dream in the best possible light. We are here to help you succeed, and it is your success that drives ours.
It is exciting to start your journey. It is also comforting to know you do not have to set out alone. We are here to discuss every stage and help you overcome every challenge in your venture, starting with your small business financing. Get to know us with no cost or obligation with our business builder steppingstones. We are confident you will find, as have thousands before you, that choosing to have the Forward Progression Development walking along on your side is your first wise business decision!