Need Money For Your Small Business?

by Sue Pitts on March 27, 2009

Yes.  Times are tough and businesses bottom lines are suffering.   I am seeing even the strongest businesses taking a double take at their financials.

But the first answer to low cashflow problems is not always a bank bailout.  Banks will not even consider giving you working capital to help your business cashflow until the following things in your profit and loss statment have been tended to.

1. Income.  Are you doing everything you can to get your income up to its potential.  Easy for me to say, i know.  But if you don’t have a strong marketing strategy to hand them your don’t have a leg to stand on.  Telling a banker that your business relys on Word Of Mouth and customer referrals is not enough. 

2. Cost of Goods/Services Sold.  How much does it cost you to do business.  Are your prices enough to cover that cost?  Has your suppliers prices risen and your prices have stayed even?  Are you controlling your inventory and not wasting more than you think.  Losing control of your margin can have huge consequences on your bottom line.  For example if you are running your restaurant your Cost of Goods Sold should be right around 40%. In other words you are making .60 cents to every dollar sold.  If you are not controlling waste and .60 cents turns into .80 cents, you won’t have enough to pay your operating costs. 

3. Expenses  – What are your monthly operating expenses.  Is there anything that you can trim off without jeopordizing your income potential?  This is the time call your insurance agent and internet provider and see if their are any ways to subtract a few dollars.

The bottom line is that a bank is not interested in helping you by giving you a quick fix.  Money will eventually run out if these things are not working right. You need to be doing everything you can to earn your potential profit.  Banks are interested in growing businesses.  If everything is fine tuned in your P & L and you are looking at growing by hiring new employees, building a new warehouse or buying more inventory so you can meet current demand, banks will be interested. 

I might have spoken too soon.  Banks will be also interested in your balance sheet.  Work on the P & L and watch for a post in the near future on healthy balance sheets. 

In the mean time, if you need help call on your local Small Business Developement Center or SCORE Office. These organizations provide FREE counseling for small businesses (500 employees and less).  For Southwest Iowa visit www.iwccecenter.com and for Iowa visit www.iowasbdc.com

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