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:

Mobile Car Washing Long Term Opportunities in the Market

The long-term outlook for the Mobile Car Washing industry is... Read More

Corporate Espionage in Franchising

Franchising Trade Journals do not do well, because today with... Read More

How Entrepreneurs Succeed - The 5 Qualities Needed For Business Success

What is it that sets a successful businessperson apart from... Read More

The Heroic Entrepreneur: Profiting from Your Brilliance

If you look up the definition of hero in Webster's,... Read More

Oil Change Guys History; Part III

Studying the history of franchise companies is interesting is watching... Read More

New Rules

Last week I was working with one of my small... Read More

Franchising Companies Need New Franchisee Checklists

When franchise companies are moving fast in the market place... Read More

Entrepreneurs: Benefits vs. Features-Know the Difference!

Entrepreneurs know their business. They know their product, their service.... Read More

Competitive Edge

In his book, The Road Ahead, Bill Gates of Microsoft... Read More

How To Start a New Business

While it is tempting to just leap into a new... Read More

10 Ways Entrepreneurs Shoot Themselves In The Foot

Entrepreneurs and their businesses have a tendency to ambush themselves... Read More

Franchise Business and Franchise Businesses

Franchise business is being part of a successfully proven business... Read More

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

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

Taking Charge and Getting Results: The Choice is Yours

As one of the most successful direct sales entrepreneurs in... Read More

Business Name - How to Choose One

It's very important to get your business name right. You... Read More

The Ideal Length of Your Business Plan

How long should a business plan be? A business plan... Read More

Financial Issues in Business Startup

A primary inhibitor of business start-up is that few people... Read More

The Magic of Float

If you've ever received a service today and paid for... Read More

How to Become a Successful Entrepreneur on the Web

Becoming a successful entrepreneur in the online world is no... Read More

The Myth of Undercapitalization - Six Ways Entrepreneurs Achieve Success in Spite of Start-Up Money

This year more than 17 million people will become entrepreneurs,... Read More

Profile of Women Leaders

Leadership is based on two words, "pressure and support"and that... Read More

What Kind of Business Should I Start?

It's not uncommon to reach your 30s, 40s or even... Read More

Judging Entrepreneurial Ideas

Most entrepreneurs constantly come up with new ideas. Whether they... Read More

A Secret To Extraordinary Accomplishments

I sat watching a documentary on U.S. Navy SEAL Team... Read More

Methods of Generating New Ideas for Entrepreneurs

Summary: Even with a wide variety of sources available, coming... Read More

led light facts led wall pack lights Pete's produce ..