Worcester Business Journal

www.wbjournal.com June 6, 2016 • Worcester Business Journal 17 B usiness needs the life- sustaining force of capital circulating within it to prosper, just like the human body needs oxygen. There is no substitute for capital. The 27.9 million small businesses across the country face the daily dilemma of figuring out where to procure this capital. For most, banks are the starting point on the capital journey because they offer the best interest rates and are well capitalized to lend. However, banks will often not extend credit to a small business that may have encountered challenges, unless they have an incentive to do so. The U.S. Small Business Administration (SBA) provides an economic incentive for banks to lend to small business. The SBA is a g o v e r n m e n t - g u a r a n t e e program, not a lender. Most major banks participate in this program because of the guarantee, which can be as much as 85 percent on loans up to $150,000 and 75 percent on loans greater than $150,000. The guarantee reduces the lender's risk The SBA's flagship product is the 7(a) program. At the end of the 2015 fiscal year, 63,000 loans were made using the 7(a) program, with a value totaling $23.6 billion. This was a 22-percent increase in the number of loans, and a 23-percent jump in total dollars over the previous year. Lenders examine a number of factors during the underwriting process to establish the creditworthiness of the business, such as years in business, the owner's credit report, the industry, management of the company, personal and business tax returns, and collateral to secure the loan. Ultimately, the lenders want to see a history of profitability. Cash flow is critical because it demonstrates the business can afford to pay back the loan. A business should have a positive cash flow, meaning the business is generating sufficient cash from operations to service the debt on the loan, which is the key metric lenders will evaluate. Business owners can do a number of things to increase their chance of receiving a SBA loan. First, the business should have up-to-date financials, including an income statement (often called a P&L), a balance sheet, accounts receivable and payable reports. The business should also provide copies of the most recent three years of business and personal tax returns. Also, the business should develop a clear plan of how the capital will be used, along with cash flow projections for a minimum of two years demonstrating success. Although a business plan is not required, a project overview and financial projections are. The best time to get a loan is when the business doesn't need it. This might sound counterintuitive, but the logic is sound. When all is going well for the business, it is in a position of strength to seek capital. In the end, make sure you get your economic house in order before you apply for a loan. It takes time to go through the entire loan process. To be safe, apply 60 days before you need your capital lifeline. To get started, visit the SBA at www.sba.gov to find a participating lender. n Anthony Price is the CEO of LootScout, which counsels small businesses how to raise capital. You can reach him at Anthony@LootScout.com. 10 Things I Know About... The SBA is a lifeline to small business KNOW HOW 10) No sense of urgency There is no time better than the present to close your sale. You should never procrastinate the close. 9) No trust It is nearly impossible to sell a product or service without first earning the trust of the client. You must appear to your prospects as being competent. Otherwise, you will be seen as a waste of time, money or effort. 8) No rapport Rapport is one of the critical components of a sale, something that is difficult to describe but easy to know when it's present or, when it's absent. Remember, you have two ears and one mouth; good salespeople should listen twice as much as they speak. 7) Not understanding the need Prudent salespeople fulfill an actual need. They take time to get to know their customer. They understand their customer's real needs for the product or service because they know these needs lead to ongoing sales through repeat and referral business. 6) Not selling the solution Sell the problem you solve, not the product; sell the sizzle, not the steak. All products and services solve a problem or fulfill a need. It's this solution that people connect to and ultimately buy. 5) Ignoring influencers To avoid this common mistake you can simply ask your prospective client, "Who else other than yourself will influence your decision or that you would like to have involved in the decision process?" 4) Not asking questions Effective questions are a powerful, non- threatening, form of persuasion. Asking questions is the most important skillset for any professional salesperson since the answers ultimately illuminate the road to the sale. 3) Be there The most important words in sales are "Be There." Be there literally, heart, soul, body and mind. Don't allow yourself to be distracted. 2) Price Awkwardness about price is the Achilles ' heel of most sales teams. No one buys price, ever! They buy value instead. If you focus on presenting value, price will seldom be an issue. 1) Confidence People are drawn to confident leaders and turned off by those who lack it. I suppose we like to associate ourselves with winners and, perhaps, we equate confidence with winning. n A s the old saying goes, "You have to spend money to make money." No matter what industry you are in, there is competition out there. So everyone needs to cut costs where they can to improve margins. Maybe you've already consolidated duplicate efforts, worked to build your buying power and allowed employees to telecommute. Here are three ways you may not have considered to reduce money your company is putting out there and pump up the bottom line. Outsource. Freelancers are your friends, says Quicken Senior Manager Holly Perez in an article at BusinessNewsDaily.com. Contract help can be a godsend when your department gets busy or when there is a short-term project on the horizon. "If a particular temp worker stands out, you may be able to hire them … which could help you cut recruiting and training costs," as well, she says. If you still have them, consider eliminating liaisons or coordinators. This suggestion is made in an article by Kevin Coyne, Shawn T. Coyne and Edward J. Coyne Sr. at HBJ.org. "These positions were established on the assumption that two or more groups cannot understand each other's functions well enough to communicate efficiently. Multiple studies have shown that this assumption is often wrong," they write. Where coordinators or liaisons can be valuable to companies that have departments all over the country, it's less true of those near to each other, the authors write. Ensure the cost-cutting message is communicated down the line. "A few pronouncements from on high won't do the trick," writes Josh Peters at Strategy- Business.com. "Managers from the CEO on down must reinforce the message consistently and continuously, clarifying corporate objectives and the behavior changes needed to reach them." Otherwise, redundancy and duplicated efforts still exist, he says, or initiatives that are, ultimately, of low value to the organization. n 101: CUTTING COSTS >> BY SUSAN SHALHOUB Special to the Worcester Business Journal Sales killers BY ANTHONY PRICE Special to the Worcester Business Journal By Tom Herald Tom Herald is the chairman of Greater Worcester for executive coaching firm Vistage. Reach him at Tom. Herald@vistagechair.com.

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