The Excellerator 3Q13   Get Excellerated!

Summer’s over and it’s time to get back down to business! EA’s mission is to provide the small to mid-size business marketplace with business services that meet or exceed industry performance expectations, at rates well below the industry norm.

With our mission in mind, this time last year we rolled out Excellerated Staffing and Excellerated Benefits.  In just 12 short months Excellerated Staffing (RecruitingForLess.com) has met the staffing needs of numerous clients in a variety of industries, filling roles across the OFIS spectrum (Operations, Finance, Infrastructure,Sales).  To see recent postings click here.

Our service focus this quarter is financing.  EA has secured hundreds of thousands of dollars in loans for clients.  A need for financing can kick in at any stage of the business life-cycle for a variety of reasons.  See below for our Financing Do’s and Don’ts.

Want to learn more about our services?  Visit GetExcellerated.com, e-mail us at info@GetExcellerated.com or call 905-597-1220

Financing Do’s and Don’ts
For most businesses arranging financing at some point over the course of the business life-cycle is inevitable. Be it start-up financing from the BDC (Business Development Bank of Canada), a government backed CSBFL (Canadian Small Business Financing Loan), or lining up a loan or a line-of-credit with a tier one bank, loans are a necessary “evil” of almost any business venture. Over the past few years Excellerated Analysis has facilitated hundreds of thousands of dollars of loans on behalf of our clients. Here is our list of do’s and don’ts when it comes to securing financing.

#1 – It’s your money. Keep It!

Whether you need $25,000 or $2,500,000, it’s all yours… to pay back! Why should you pay a percentage of your loan to a “facilitator” i.e. loan broker? It was on the merit of your business fundamentals and business plan that secured the loan, don’t let them ride your coattails and margins. Pay for time and effort, if your business plan has merit you’ll get the loan.

#2 – The devil is in the details
The purpose of a business plan (yes, you need a business plan) is to provide the rationale and strategy behind the need for the funds. Many times as management works through the modelling process, details that had not previously come to light are discovered providing greater insight into the plan. From the bank’s perspective it demonstrates that management has a good handle on the business and that their funds will be in good hands.

#3 – Aim high, there’s lots of room!
Managers often ask how much credit they need. While a business financial model will indicate the minimum capital required, when it comes to the maximum the sky’s the limit. Your lender will set the ceiling based on business performance, balance sheet strength and other factors. Better to have access to too much credit, than too little… just remember to spend wisely!

#4 – Time to call in some “favours”
One of the factors a lender will consider when determining the amount to lend is the Aged Receivables. The Aged Receivables report tells how old the money is that is owed to the business. Lenders will frequently lend up to a percentage of the aged receivables (usually 75%), but not consider receivables over 90 days. More importantly, an over 90 days greater than 10% of the total receivables is a major risk flag and may scare away lenders. Try to work down the over 90 days receivables before engaging lenders. It’s your money, go get it!

#5 – Be prepared to put some skin in the game
Lenders want to know that if things go south they are not the only ones at risk. Having an owner with equity in the business demonstrates that the owner has found the business worthy of their own investment and has a vested interest in its success. Often banks will go a step further and require personal securities to cover the loans for small businesses.

#6 – It could be it’s not you, it’s them
There are many reasons why businesses get turned down for loans. Sometimes it’s for reasons that have nothing to do with your business. Banks are businesses too. If they have maxed out their risk tolerance or lending capacity for a particular industry or loan type in that period, a rejection may be the result. Work with prospective lenders to understand why the plan was turned down. If the issue was on your end put corrective actions in place to better position the business for the next go round.

#7 – There is more than one way to skin a cat (or so they say)
Work with your banker to best leverage the different debt products available to achieve the desired debt and rate structure. A little fancy footwork can go a long way.

#8 – Be prepared to compare apples to grapefruits
No two bank offers are the same. Make sure that total credit available, rate structure, fees, security requirements, covenants, financial statement reporting requirements, customer service and accessibility are all considered when comparing offers.