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 Entrepreneurs

Applying for a Business Loan: Putting Your Best Foot Forward

by John Day

Remember the book called “Catch 22”? It is now commonplace to call a “Damned if you do, and damned if you don’t” situation a “Catch 22”. This is a predicament that many small business owners have found themselves in. Running short of cash, the owner goes to the bank to borrow money, only to find that they don’t qualify for a loan because they don’t have enough money. This is quite maddening to the business owner who laments, “If I had enough money, I wouldn’t be asking for the blankety-blank loan!”

Seems kind of stupid, but you have to understand what bankers are up against. Number one, they have to have some assurance that they are going to be repaid. They have to sell this loan to the “loan committee” of the bank, and they are not about to present a package that will make them look foolish. Furthermore, they have auditors who look very closely to make sure the loans were issued according to bank policies and procedures. If a loan officer has too many loans that “go south”, then his/her track record starts to affect his/her career.

This is why you find many loan officers who go strictly “by the book”. These people refuse to look at any extenuating circumstances that might indicate that you would be a “good risk” regardless. Unless you fit into their narrow criteria of “risk” you might as well forget it. It is best to find a bank manager or loan officer who has plenty of self-confidence, is familiar with how small businesses operate, and is willing to look at the big picture. They can sense whether a loan applicant is solid or shaky. This is the point at which you, the applicant, will want to put your best foot forward.

You may find that as long as you have substantial equity in a home, good credit, and adequate cash flow that you are a tasty morsel in the mouth of a loan officer. However, if you are short in any of these areas, you are going to have to overcome the banker’s natural skepticism.

First impressions are paramount. If you are not organized, you are dead meat. If you are asking to borrow money, then you must possess the skills necessary to pay the money back. These are skills, such as, the ability to think and plan ahead, and the discipline required to operate your business in a professional manner. This means having the know-how to gather information and organize it in such a way that you can make meaningful and timely decisions. Ask any banker and they will tell you of countless business customers that come in seeking a loan who don’t even know what a financial statement is. There are many other business customers who seek loans that do have a financial statement but haven’t a clue as to what it means. This does not bode well for first impressions.

Compare the individual who comes to the bank, nicely dressed, well groomed and possesses not only a financial statement that he/she understands, but has a plan as to how he/she will pay the loan back. This phenomenon is so rare that a banker will usually sit up and take notice.

If the reason you are short on cash and need a loan is because you are a poor manager who is in denial about your failing business, it will be obvious to the banker. Bankers are objective. They are not going to throw good money after bad. However, if you have a healthy business and you want to finance a new piece of equipment that will enhance your revenue earning capacity then your request will seem reasonable. Perhaps you need a line-of-credit to shore up your cash flow during less productive seasons, and you plan to pay back the line during productive seasons. These are the kind of stories that make good business sense to a banker.

To back up your story, you will need a Balance Sheet and Profit & Loss Statement that reflects the history of your business activity. Included should be an analysis of your business trends using some key business ratios. If the numbers look good, then go for the loan. Remember though, you can’t rely on the banker to recognize all the positive aspects of your business, therefore, you should provide a narrative of how your business works and why the requested funds for the business will help you make more money.

John W. Day, MBA is the author of two courses in accounting basics: Real Life Accounting for Non-Accountants (20-hr online) and The HEART of Accounting (4-hr PDF). Visit his website to download for FREE his 3 e-books pertaining to small business accounting and his monthly newsletter on accounting issues. Ask John questions directly on his Accounting for Non-Accountants blog .

John Day may be contacted at http://www.reallifeaccounting.com or jday@reallifeaccounting.com

WIPP Applauds Rep. Bean (D-Ill.) for Support of Small Business Access to Capital

WASHINGTON, Oct. 6 /U.S. Newswire/ -- Women Impacting Public Policy (WIPP), the nation's largest bipartisan women's business group, applauds Rep. Melissa Bean (D-Ill.) for her cosponsorship of legislation that would stimulate investment capital in the nation's small businesses.

Bean joins Rep. Tammy Baldwin (D-Wis.), Rep. Roscoe Bartlett (R-Md.), Rep. Melissa Hart (R-Pa.) and Rep. Mark Souder (R-Ind.) as cosponsors of the Access to Capital for Entrepreneurs (ACE) Act of 2006. Introduced in April by Rep. Don Manzullo (R-Ill.), chairman of the U.S. House Small Business Committee, and Rep. Earl Pomeroy (D-N.D.), the ACE Act (H.R. 5198) would encourage angel investors to help fund start-up companies. A similar bill has been introduced in the Senate, S. 3950, by Sens. Snowe and Kerry. WIPP is leading the Coalition for Investment in Small Business (CISB) with other small business organizations to support the ACE Act.

"Securing passage of this bill is WIPP's number one legislative priority," said WIPP President Barbara Kasoff. "Representative Bean was a small business owner. I am sure she knows first hand how important and yet difficult securing capital can be for a small business. We applaud her leadership."

According to the 2006 survey respondents, 53 percnet stated that access to capital is a pressing issue. Additionally, the National Women's Business Council found that only 34 percent of women business owners have bank credit of over $50,000 compared to 58 percent of male business owners; and most women business owners rely on their business earnings and own private resources for ongoing financial needs.

"Women business owners lag behind their male counterparts when it comes to the amount of capital they are able to obtain," said Kasoff. "The passage of this legislation will help close this unfortunate gap."

If passed, the ACE Act would provide a mechanism for small businesses to obtain critical equity funding by establishing a tax credit for investors in the early stages of a small business. As the oldest and largest source of small business funding, private investors are necessary to nation's economic health. In 2005, angels invested $23.1 billion in 49,500 small business ventures. Currently, many states provide state tax credits for early investing and the bill is patterned after the success of these programs.

By providing a 25 percent tax credit up to $500,000 per taxable year to qualified investors, the ACE Act would encourage more small business investment. The Act would limit investment into a single qualified small business to $250,000 per taxable year.

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WIPP is a national bi-partisan group comprising over 550,000 members. The non-profit organization is the public policy voice for 46 national Women in Business groups and The Voice for Women in Business in Our Nation's Capital. Visit http://www.wipp.org.

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http://www.usnewswire.com/

A Culture of Discipline

by William Frank Diedrich

A "culture of discipline" is a phrase used by Jim Collins (Good to Great) in his study of great companies. All of the great companies, those that far outperform others, have a culture of discipline. This does not mean that they spend their time disciplining people. When you have a culture of discipline you rarely need to discipline people.

A culture of discipline is not about punishing people, but it is about control. It is about self control. Disciplined thinking leads to disciplined action. All greatness, whether it be in athletics, music, art, business, leadership, healing arts and sciences, teaching, or sales, is a result of discipline.

Whether we are talking about an individual or an organization, it all starts with the question: "Who are you and what is your purpose?" Your purpose is found at the crossroads of that which you are passionate about and that which you are good at. Once we are clear about our purpose and the kind of person and/or organization we are, then we need to discipline our thinking in order to achieve it. Thoughts and behaviors that contribute to the purpose are then nourished and expanded.

Most people, and most organizations are undisciplined. We entertain thoughts in our minds that contradict our purpose. We allow behaviors in ourselves and others that should be unacceptable. In a culture of discipline we are clear about who we are and where we are going. We address contradictions honestly, first in ourselves, and then in others, and resolve them.

A year ago I wrote in this newsletter about two very different businesses, one who has a culture of discipline and one who has not. Schulers Books and Music, a local bookstore and cafe is my example of a culture of discipline. At one of the stores I often see the manager out on the floor. Whenever a customer approaches him, he drops everything and serves the customer. I always receive cheerful and helpful service whenever I go there.

A chain restaurant I visited, called Steak and Shake, does not have a culture of discipline. I walked in to get a take out order and could not get served, or even acknowledged. I wrote to the corporate office of Steak and Shake and received a cursory reply.

The difference between these two businesses is that at Schulers, people think a certain way, and act in alignment with those key thoughts. These are thoughts about valuing customers and offering excellent service. At Steak and Shake, people are on their own. They have not been taught how to think, and thus behave, in alignment with the organization's purpose. You may or may not get lucky and get good service. At Schuler it is not luck; it is consistent great service rooted in a culture of discipline. Embedded in this culture is a deep love for reading and for community that is evident in their consistently great service.

I worked with an organization where the senior leaders loved their work and worked very hard. They saw themselves as disciplined. Yet, they were very undisciplined. Leaders in this organization each went in their own direction. Some of them were noted for being unapproachable and cranky. Others avoided all conflict and said "yes" to everything. Another was known for flying off the handle whenever he felt threatened. All of these managers were talented people. Discipline is about practicing the thoughts and behaviors consistent with your purpose and your goals. It is about holding yourself accountable when you are inconsistent. Much of the talent and hard work of these managers was dissipated because thinking and behavior were not in alignment with purpose and values.

In a culture of discipline we live in alignment with our purpose and in accordance with our values regardless of what is happening in the world. A culture of discipline is responsive to whatever happens. A non disciplined culture has knee jerk reactions to both crisis and opportunity. This is because the motivator in these non disciplined cultures is fear. In a culture of discipline you are motivated by love--love for your purpose; love for those whom you serve; and love for your values. You live from the inside out. This makes you more stable, yet responsive to what is happening around you.

When opportunity presents itself, you don't grab for it. You think about it. You ask: "Does this fit with my/our purpose? Is this something I/we are willing to do well? Can I/we be passionate about this?" Also, you want to know if it will contribute to your long term viability.

When crisis hits, you respond in ways that are consistent with your purpose and values. No short cuts! Collins wrote in Good to Great, that companies who stuck by their values tended to be more successful. The key, he found, was not in what values they chose, but that they stuck by their values, whatever they were.

In a culture of discipline we make a commitment to our mutual purpose and values. We refuse to allow behavior that is outside that framework. People who violate the purpose and values are given a chance to learn and to change. If they choose not to, they leave. A culture of discipline is not an authoritarian regime where one person is the enforcer. Those organizations tend to fall apart when the dictator leaves. The disciplined culture requires people to adhere to a consistent system, within which they have freedom and responsibility. In a culture of discipline we all help each other to stay on track by reminding each other through ongoing feedback and being a role model.

If you want to see if your organization has a culture of discipline, listen to the stories that are told. Are they stories of accomplishment and appreciation of the efforts of people? Or, are they stories tinged with negativity and criticism? Do people tend to be generous with credit for work well done, or do they mostly talk about what "I" did? Fear based and egocentric stories are ultimately demoralizing and feed negativity. Stories about people going out of their way to help people, and stories where credit is given to others consistently reinforce the purpose, the values, and the way of thinking that identifies the organization at its best. We discipline our minds away from negative and victim thoughts and toward thoughts of appreciation, understanding, problem resolution, and the possibilities to be found in any situation.

I must admit that I have often rebelled against discipline. I thought it would cramp my style or limit my freedom. What I have learned is that discipline enforced by a dictatorial person does cramp everyone's style and limit freedom. Discipline agreed to by each individual does the opposite. Self discipline allows us to achieve excellence.

Discipline that grows out of a commitment to a common purpose creates a structure, a consistency that helps people to make wise choices. The unwillingness to accept poor behavior is reassuring. Employees see leaders behaving consistently and they are inspired to think and behave in alignment with purpose and values. Extensive work rules are not needed when people are already motivated.

Whether you lead an organization or just yourself, discipline will determine much of your success. Each day examine your thinking, your behavior, and your decisions. Ask: "Does this fit with my purpose? Is this a true reflection of who I am? Does this fit with my organization's purpose and values?" Learn to say "No" to thoughts and behaviors that do not align with purpose and values. Say "Yes" to thoughts and behaviors that affirm your purpose. Thinking, and then doing the right things consistently will keep you on purpose and lead you toward greatness.

Connect the dots. Apply this information to your workplace, your church or spiritual community. your family, your neighborhood, your athletic team. Is there a common purpose that inspires your passion and commitment? Are there values you live by? Do you value and serve each other in order to achieve your common purpose? How can you create a culture of discipline without becoming a disciplinarian? How can you work with others to create an environment where people are clear and self motivated?

William Frank Diedrich is a speaker, executive coach, and the author of three books including Beyond Blaming: Unleashing Power and Passion in People and Organizations. William offers an online leadership class, The Leaders' Edge, that is both inexpensive and effective. This ten week class helps leaders to transcend ego issues and become truly great at what they do. Register at http://noblaming.com William Frank Diedrich may be contacted at http://transformativepress.com or roadhome@transformativepress.com

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