Drug testing

Financial Issues in Business Startup

A primary inhibitor of business start-up is that few people have the financial cushion to give up a job for the uncertain income of a start-up venture. In a recent survey, about 30% of new business founders identified inadequate funding as their biggest hurdle, and a similar amount said lenders were too conservative. About 15% reported being unable to find investors, and a similar amount claimed a lack of collateral.

The prospective new business owner approaching a lending institution should keep in mind the "five c's of credit:" character, cash flow, capital, collateral, and (economic) conditions. Character consists of the borrower's integrity, experience, and ability; particularly close attention is paid to a borrower's credit history, which is a matter of record. Should you decide to try to fund a startup through a commercial lender, the remaining criteria are addressed in the loan request.

The loan request should include a credit application, financial information such as tax returns and personal financial statements, and a brief business plan emphasizing projected financial performance of the new venture. The plan should demonstrate how the business will generate sufficient cash flow to repay the loan, specify collateral, and show the borrower's personal investment.

In addition to servicing the loan, cash flow should also cover operating expenses, and provide for some re-investment for the increasing financial demands of a start-up venture. As collateral, banks will often lend up to 80% of the market value of real estate, and up to 50% on business assets such as equipment, inventory, and current accounts receivable. Lenders and investors often require that the bulk of start-up monies be provided by the business owner. This assures these stakeholders that the owner is committed, and has confidence in the financial projections.

When the entrepreneur can not meet the requirements of commercial lenders, and does not have a favorable arrangement with partners or other investors, the remaining options are difficult and expensive. These options include public-sector guarantees, finance companies, and the venture capital market.

Even where the start-up investment consists largely of other people's money, the amount of financial risk for the entrepreneur is beyond what most can responsibly handle. For many with the financial means, the stress of bearing complete responsibility for the company's direction and performance is the discouraging factor.

Once the venture is off the ground, a new set of challenges faces the entrepreneur. A recent survey showed their major concerns, named by more than half of respondents, were: "getting new business/clients;" "managing my time;" and, "promoting my business." Another interesting question was what they missed about the corporate world. The top three responses were "company-paid health insurance," "a regular paycheck," and "retirement plans."

Various estimates have been made for the failure rate of business start-ups, based on various concepts of failure and of appropriate survey methods. The consensus seems to be that less than half of new businesses survive the start-up "trauma."

Perhaps, a major reason for what seems to be a high failure rate is that it is so easy to start a business. There is no institutionalized check of qualifications in the U.S.; on the contrary, our tax dollars fund the Small Business Administration and other agencies and programs that encourage business formation.

Another survey showed that over 80% of entrepreneurs would take a pay cut if that is what it took to keep the business going. Just over a third would sell the business, even if a good price were offered.

John B. Vinturella, Ph.D. has almost 40 years experience as a management and strategic consultant, entrepreneur, author, and college professor. For 20 of those years, Dr. Vinturella was owner/president of a distribution company that he founded. He is a principal in business opportunity sites jbv.com and muddledconcept.com, and maintains business and political blogs.

limousine chicago service
In The News:

Business Development: The Basic Ingredients

Cooking isn't much different than building a business. You have... Read More

Time Management Tips for Solo Entrepreneurs

Does it seem like everyone and everything is vying for... Read More

Could a Non-Profit Structure Be Right for Your Business?

If you have a business idea, or an idea for... Read More

Entrepreneurial Excerpt from a Speech to Small Business

Having built a business from a bucket of water and... Read More

Entrepreneurial Business Plan The Down And Dirty Way

Does the idea of running your own business sound exciting?... Read More

Solo Mojo for Solo Entrepreneurs --- Where?s Your Juice?

I recently read a magazine article about Andrew, a 42-year... Read More

How Much Risk is Necessary to Grow Your Business?

A business owner is thoroughly responsible for their own financial... Read More

Reducing the Stress of Being an Entrepreneur

Starting and running your own business can be exciting and... Read More

3 Essential Elements of Operating a Successful Business

Have you ever imagined what it would be like to... Read More

Franchises - Emotional Fulfillment - Control Your Destiny

Does A Franchise Meet Your Needs?When you think of becoming... Read More

The Fear Factor

I recently conducted a lil' survey asking my colleagues what... Read More

Franchises - Emotional Fulfillment - The Challenge

Does A Franchise Meet Your Needs?Do you look forward to... Read More

Definition of Entrepreneur

EntrepreneurAn entrepreneur is a man who organizes and manages the... Read More

The Visionary Entrepreneur

Any success you have in life must begin with a... Read More

Health Insurance for Solo Entrepreneurs

One of the most important benefits employed people enjoy is... Read More

The Entrepreneurs Dilemma

In business, you plan to protect your inventory, your unique... Read More

An Entrepreneur and a Life To Be Remembered

I was reminded of my own mortality today. I guess... Read More

Entrepreneurial Hate, its out there

Today, I got an email from a lady who hates... Read More

Its Good to Know Your Banker

Recently my bank opened a new branch that is a... Read More

Start a Business Selling Government Surplus

Did you ever wonder what happens to all that government... Read More

The Secrets to Becoming a Successful Creative Entrepreneur: JJK Secrets #19-21

Hello Creative Entrepreneurs!Welcome to the e-class on Creativity & Entrepreneurship:... Read More

Four Steps to Entrepreneurship

As more and more people start or consider starting their... Read More

Double Down on Marketing

If you want to compete in the world of high... Read More

Are You Sure You Want To Start Your Own Business? Part Two of a Series

Why, exactly, do you want to go into business for... Read More

A Dorm Room With A View

As a senior in high school, he paid cash for... Read More

garage induction lights top led manufacturers Pete's produce ..