Operating Day to Day

Alternate Financing Sources

Failing to secure a business bank loan may not mean the end of your dreams. You might still:

Attract a private investor. Venture capital firms or private individuals called “angels” may be willing to invest in your business if they not only see potential, but also the opportunity to exercise some level of control and/or receive a percentage of future profits. Venture capital firms are often controlled by banks, insurance companies and large corporations; angels are typically wealthy individuals looking to support “hot” ideas. In either case, these types of investors will take risks only if they truly believe in you and/or your product or service, so a business plan heavy on “wow” is essential. See page 34 for a list of Florida venture capital firms or visit Florida Venture Forum at www.flventure.org for more information.

Try crowdfunding. The idea of crowdfunding as a way to underwrite small business growth was triggered by passage of the federal JOBS (short for Jumpstart Our Business Startups) Act in 2012, which allows private companies to solicit investors on the web and opens the door for anyone to become shareholders. SEC rules lay out the specifics, including the paperwork required and limits on how much money an issuer can raise. If crowdfunding appeals to you, look to specialists at your local Florida SBDC office for advice.

Apply for a grant. Some businesses engaged in scientific R&D may qualify for federal grants under the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) programs if their projects meet certain federal objectives and have high potential for commercialization. Visit www.SBIR.gov for details. For information about grants available in Florida, visit https://florida.grantwatch.com.

Manage Your Money

Wealth is power and money talks. If you want to succeed in business, you must pay attention to ebb and flow. The amount of money flowing into and out of your bank account on a daily basis is an indication of your company’s overall health. A positive cash flow indicates that your liquid assets — cash or other assets that are readily convertible to cash — are increasing and that your business is growing. A negative cash flow signals that your business is on the decline. If you want to stay in business for any length of time, maintaining a positive cash flow should be your No. 1 priority.

My records show that my business is growing and making money, but my bank balance barely covers my monthly expenses. What’s going on here?

By “records,” I assume you mean your balance sheet, which is essentially a statement of your firm’s assets (things you own) and its liabilities (things you owe), and I’m guessing that on yours, assets are higher than liabilities. While that’s a positive thing, it doesn’t necessarily mean your business is in good financial shape. The fact that you are running out of cash at the end of the month suggests you are short on “liquid assets.”

Liquid assets consist of cash and other assets that can readily be converted to cash, such as stocks and bonds or money you expect to receive within a month. Accounts receivable over 30 days or physical assets such as inventory and supplies are not considered liquid.

For any small business, cash is king, and if you don’t have enough money in your checking account to pay your monthly bills, you need to take action now:

Establish a line of credit with your bank, especially if you are likely to experience seasonal ups and downs; no interest charges will accrue until you draw upon the credit line.

Age your accounts receivables, grouping them as current, 30-60 days and over 60 days. Contact any customer over 30 days, and for those more than 60 days in arrears, consider a collection agency. To avoid lagging receivables in the future, ask for payment at point of sale whenever possible.

Negotiate longer payment terms with your suppliers; most everything is negotiable.

Keep track of when your expense items come due — monthly, quarterly, annually — and plan accordingly.

Answer provided by Gray Poehler
Business Counselor, SCORE, Naples Chapter

Tags: Florida Small Business, Ask the Experts