Posts Tagged ‘business finance strategy’
More Reasons For Having A Business Financing Strategy
April 3rd, 2010
In my last post, I laid out why its become more important for business owners to have a more formalized business financing strategy in place on an ongoing basis for their business.
Here are some additional reasons why this has become more important in the current market.
- No Senior Lender Security. With the capital markets in major melt down, no senior lenders are guaranteed not to suffer significantly from the current recessionary process. As a result, no matter who you’re senior lender is or how long you’ve been with them, and whether you’re in covenant or out of covenant, there are no guarantees that your demand loans will not be called or reduced now or in the near future.This means that all businesses need to have their financing profile up to date at all times and they should also have an ongoing awareness of their primary and secondary options to finance their business if required. For many, many businesses, this is something that is beyond comprehension as several have gone decades without any senior lender related issues. But the world has changed, and its time to adjust or be left scrambling when circumstances move against you.
- Source of Contingency Funds. The term contingency planning is often brought up but seldom put into any type of practice for most business operations. With the tightening up of capital markets and the unpredictability related to securing incremental business capital, its become more important to have a capital contingency plan in place. This can involve working towards reducing the amount of leverage as a percentage of equity on your balance sheet, creating credit reserves in your cash or debt financed lines of credit to allow for short term down turns in business, developing emergency funding plans and sources of financing that can be injected into the business if required on short notice.
- Lower Risk Growth Plans. While all businesses have the ultimate desire to grow and enhance profits, the strategic process for planning and implementing growth strategies need to take capital requirements into consideration to a greater extent that what we’ve typically seen in the last decade or more. Strategic plans need to be more closely reconciled to more conservative capital availability predictions so that the business does not get over extended during a tough to predict and manage external capital environment. This can be a major departure for aggressive business owners who are used to always being able to fund whatever projects they want to undertake whenever they want to undertake them.
This speaks to a more conservative approach to third party financing, whether it be debt or equity, until some reasonable amount of stability returns to the capital markets.
Click Here To Speak With Business Finance Specialist Brent Finlay
Business FinancingHaving An Up To Date Business Financing Strategy Is Becoming More and More Important
March 31st, 2010
Does Your Business Have a Business Financing Strategy?
If you’re like most business owners, the answer to the question of having an actual formal business financing strategy is likely No.
The status quo for decades for most businesses has been to focus on what generates cash flow and deal with business financing as a short term project, whenever its required.
This typically has some form of time pressure associated with it, and because there is no regular attention spent to how to properly go about getting financing arranged, brute force tends to be employed to get through the process, get the required money in place, and then get back to work.
This has been the “business financing strategy” for many small and medium sized business largely because it worked.
Leaving things to the last minute and scrambling around to get funding in place has been an effective strategy for many. Yes, it can be a pretty stressful process to go through, but its not required very often, the results get achieved, and the pain generated quickly dissipates due to small time box everything is forced into.
The challenge going forward is that the world, at least for the foreseeable future, has changed. The probability of leaving business financing needs to the last minute and then depending on brute force and will power to muscle things through has gone way down for a number of reasons.
First, there are significantly less business lenders now than 2 years ago, and the number continues to decline on an almost daily basis as the recession continues to unfold.
Second, many of the surviving lenders aren’t lending money as they scramble to collect the accounts they already have. Even if they wanted to lend money, many of them are having a hard time finding sources of funds to finance new business loans.
Third, the more established lenders are taking a more cautious approach to the market and are being more selective with opportunities and taking their time with deal assessment, not being particularly interested with anyone in a flaming rush.
And based on the current state of the capital markets, things are not going back to the status quo any time soon, effectively changing the status quo.
So now is the time to move to a more formalized business financing strategy and approach. This is something that all businesses require. Obviously smaller businesses are less capital intensive, but they still have cash flow and have to be able to fund it if they want to stay in business.
In my next post, I’m going to get into even more specifics as to why a business financing strategy is something that business owners are going to have to start investing time in to either stay in business or grow their business.
Click Here To Speak With Business Financing Specialist Brent Finlay
Business Financing