ASKING FOR MONEY PT 2
THE LOAN PROCESS
I’ve mentioned money quite a few times and will mention many more, it’s my business to talk money! I’ve also discovered the more I discuss money, the more I learn! Money is a subject that is vast. Understanding how to use it, when and where to place it for the best returns is ever changing. Interest rates aren’t the same, saving accounts aren’t one type fit all!
As a business owner, YOU MUST BE COMFORTABLE TALKING NUMBERS. I didn’t say that you had to crunch the numbers but you must be willing to discuss the numbers, learn what they mean and all that the numbers have to say! Numbers talk. Number tell people what and where your priorities lie?
Allow me to paint a picture, true story: I worked in Human Resources and a new employee applied for a car. She needed the car to get back and forth to work of course. Since she had been working for the company less than a year, she made her own W-2 to present to the car dealership. She thought it would be so easy to manipulate the system. Of course when they called to verify employment, she was employed with the company. There is limited information that can be released and salary is one of those items that by law, Human Resources cannot release. However the woman on the other end of the phone said, she didn’t believe the W-2 received was authentic and faxed a copy for verification. Of course it was not authentic. Upon receipt of the W-2, I laughed. While the attempt was cauute the numbers said it all. She did attempt to make them look real and even calculated the payroll but her amount she claim to earn didn’t align with the position she claimed to hold. Making $20 an hour as a customer service representative wasn’t believable. 2ndly, payroll taxes didn’t line up or make sense. She calculated everything in whole dollars but then as she attempted to calculate payroll taxes she was confused. Then there was the credit report along with the length of her employment (per her application). IF you make the money she listed, then there are certain expectations, like good payment history. They also reviewed a pay stub and it didn’t match the W-2. Needless to say, she didn’t secure the vehicle because the numbers contradicted in multiple areas.
Have I said enough? I’ve even attended seminars that encourage people to lie about their salary in order to qualify for credit cards. It doesn’t work. Numbers work together to paint a picture and though your mouth may be silent, the numbers will speak when your truth even when you try to hide it.
For entrepreneurs, this concept is crucial. Starting a business and securing a business loan isn’t any different. Having a great idea and a business plan isn’t enough to secure a loan. Most business owners have corporate structure, bank accounts and even credit cards BEFORE they open their doors if that owner wants to be successful. Things occur in succession, order and through process.
BEFORE anyone invests into your idea, it is profitable and wise for that potential investor to see what or how much the owner has invested, FIRST. If a business owner hasn’t invested into the business then chances are; neither will anyone else. Would you give money to a person who doesn’t believe in his or her plan enough to make an investment?! That’s not smart. I know what you are thinking, well that person may not have money to invest, well guess what; he or she doesn’t want a business. EVERYONE has something to invest; it may not be the amount needed or it may place one in a financial bind, but there is something to invest!
Loan officers think the same way. To obtain a loan, in most cases, the business owner has to have 20% of what he or she is asking. Anytime a person is linked or tied to a project financially, that person has a reason to make sure that the venture is profitable.
Another thing is to consider terms of repayment for the loan. Do you know how many clients seek to obtain loans and think that they it will mean that they can lie back, chill, take their time because the repayment plan will be low? Working capital is beneficial to any entrepreneur but it will not be something easy, simple or money that can be wasted; every dollar should be earmarked, plans in place for distribution AND MOST IMPORTANTLY, A RETURN ON THE INVESTMENT OF THE FUNDS. In other words, you do not get a loan to assist you in living while the business grows; that money should be infused into the business to guarantee the business grows financially!
As a bookkeeper and consultant, it’s my job to walk clients through the process of their business and securing a business loan IF the loan will assist them. That process begins with a business plan and involves much more! Sometimes the details, the plans can become overwhelming to say the least and make one question if owning a business is worth it all.
Don’t attempt shortcuts, one shortcut always leads to another and in the process of taking shortcuts you will lose or miss valuable lessons and one of those most valuable one, is be able to discuss money on any and ALL LEVELS!
