Business Funding Secrets

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Positive quotes to get you thru the week.

The year is going, let him go; Ring out the false, ring in the true. ~Alfred, Lord Tennyson, 1850

Be always at war with your vices, at peace with your neighbors, and let each new year find you a better man. ~Benjamin Franklin

Every day is a fresh beginning, Listen, my soul, to the glad refrain,
And spite of old sorrow, and older sinning, And troubles forecasted, and possible pain, Take heart with the day, and begin again.
- Susan Coolidge

An optimist stays up until midnight to see the new year in. A pessimist stays up to make sure the old year leaves. ~Bill Vaughan

We will open the book. Its pages are blank. We are going to put words on them ourselves. The book is called Opportunity and its first chapter is New Year's Day. ~Edith Lovejoy Pierce

Short sayings
often contain
much wisdom.
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Risk & Return

Most business decisions are made with a risk and return trade-off. Will buying a new piece of equipment now result in a better return, or will waiting a year be a better decision? Should the terms offered a customer be increased or decreased improving sales or resulting in a greater chance of lose? In a funding request to a lender, does a business present an adequate comfort level of not defaulting?

Risk and return decisions require someone to consider:
1. What is the expected return?
2. What is the risk involved?
3. Do the expected returns adequately compensate for the risk?

When the risk is perceived to be higher, obviously returns are expected to be higher.

Risk may be defined in two ways:
1. Total Risk - this involves a single asset, or event.
2. Market Risk - this involves a portfolio of assets or multiple events.

Understanding risk is essential for analysis of day to day business decisions, but it is also necessary when submitting a business plan to a lender. Even when financial times are good, too many business loan funding requests are submitted that don’t address risk, how to handle down turns in the economy, the loss of a major customer, etc. A tremendous number of business plans are written from a position of marketing hype, leaving the lender without any depth of understanding how the company will respond if the marketing hype doesn’t pan out. It becomes an unrealistic scenario and the lender rejects the funding request.

Despite actions be taken by governments worldwide, the credit crisis will continue for a lengthy period. There is still money for business finance available from traditional finance sources along with private finance companies, and lenders focused on specific niches. However, companies requiring business loans during the next several years need to provide business plans with projections that address the real risks facing the company. Depth of detail and sound risk analysis need to be presented. Half baked plans and marketing hype will only become substance for the local landfills. Go the extra mile. Provide detail, detail, detail. The lender needs a comfort level that YOU have a good understanding of what your company is facing.

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The staff of Business Funding Secrets Newsletter and the finance consulting firm The Project Corporation want to wish everybody a Merry Christmas, Happy Holidays, and Peace & Happiness to all.

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To Your Capital Success,