As a business finance specialist, I am regularly engaged in the conversation of why a business owner should want or need to pay for my services.
Its a good question for sure.
And on the surface at least, it would appear that there are enough business financing options out there that any business owner should be able to walk through the door of their local bank or institutional lender and get all the business financing they require. Right?
Unfortunately, perception and reality are a bit different in the world of business finance.
The process of securing business financing is typically harder and longer than most people think it will be.
There are many reasons for this of which I will only touch on a few.
First of all, most business loans or financing facilities are customized financing in that no two businesses are exactly the same in terms of what they do, the stage of business development they are in, size, scale, etc. So there is work going into assessing each and every business case compared to something like an application for a residential mortgage.
Second, lenders are always trying to balance their portfolios, so effectively what they can lend on at any given time is a moving target making it easy to waste a considerable amount of time focusing on the wrong source of capital at any given time.
The end result is that the overall process for locating and securing proper financing can be very difficult to figure out and when you do get a bearing on the way things work, everything could change before you’re going to need to draw on that information again in the future.
I was reading an article in the Globe And Mail about the small business owner’s reluctance to outsource. You can check it out by following this link … http://www.theglobeandmail.com/report-on-business/small-business/grow/expanding-the-business/small-business-owners-still-reluctant-to-outsource/article2060249/?utm_medium=Feeds%3A%20RSS%2FAtom&utm_source=Report%20On%20Business&utm_content=2060249
The article basically describes how business owners want to outsource, but are unsure of the value of doing so, and end up doing too many things themselves.
This is very true in the world of business financing as well.
With respect to source business capital, there are two basic costs that you have to consider as a business owner.
The first set of costs is your out of pocket costs, opportunity costs for your time, and lost opportunity cost for not getting the right type of financing when its required. In my experience, this can be many times the cost of third party assistance with the financing process.
The second set of costs revolves around not continually looking for better fit financing or contingency financing. Most business owners will only look for capital when its absolutely required and don’t take into account how the capital in place may be priced too high compared to available alternatives, or is not allowing for optimal growth. Once again, the true cost of not having a proper balance sheet in place can be incredibly expensive over time.
Utilizing the services of a business financing specialist is another outsourcing choice that needs to be weighed on the basis of the cost and projected benefit. This may or may not be required for every business situation, but it should likely be at least considered more often than not as the do it yourself approach can produce significant visible and hidden costs that can potentially be avoided.