An Approach to Investors and Bankers Hint: Your mother-in-law might be able to help you.Chia-Li Chien, Ph.D., CFP®, PMP®, CPBC
Chia-Li Chien | May 20, 2013
As they say, “the times, they are a-changin’.” As business people, we no longer can afford to do things the way we used to or always have. We are all trying to figure out how to do more with less. So how do you, as business owners, start to move or continue to move in a new or different direction?
Every business has a unique situation, and capital reserve needs differ, depending on the stage the business is in, position in the market, customer base and its distinct goods or services. The good news is that I have found there is available money out there and many investors are willing to invest. That is— If you have the right business model, along with the right innovative products or services, investors will be eager to talk to you. You must, however, expect to have to demonstrate how you are going to implement your strategy so your investors and lenders will get a return on their investment.
Although it may be preferable not to borrow money from anyone, including family, you understand the requirement of doing what you have to do. If you’ve tried and still have the obstacle of the absence of available capital to help you grow, perhaps another option is to look into your existing operations such as your receivables and payables processes to make sure you aren’t financing your customer’s purchases. Once you tidy-up your numbers, close gaps and fix any places where you may be bleeding capital, lenders may be willing to give you another look.
Whatever the case, you must help your lender or investors understand your business model and how it translates into that ROI. Think of borrowing the money in this way—you must expect to explain it to any lender in the same way as your mother-in-law would expect if you were borrowing from her. And just as she demands to know when she will get her money back, plus interest—not to mention her other special characteristics—you can basically expect the same from your bankers and investors!
Your mother-in-law may be perfectly lovely, but you know what they say about mixing family and money. What would you do to prepare to talk to her about your need to dip into her stash of ready cash?
So remember, at the end of the day, when your business needs money to expand, you must prepare to talk to your lenders or investors as if they are your mother-in-law. Even though they may not be “in your face all the time” as a mother-in-law might, projecting that persona on to your borrowed capital could make you feel very motivated to pay off the debt or buy back the equity sooner than later!
A couple years ago I moderated the “Understand your Financial Position” workshop in Charlotte, NC along with expert panelists John Blair, CPA, Blair, Bohle & Whitsitt, PLLC; Tom Davis, SVP, Business Banking, First Citizens Bank; Mary Hall, SVP, Charlotte Regional Credit Officer, BB&T; and Jim Mortimer, Business Counselor, SCORE. One consistent message I heard throughout the conference was that most business owners are not sure what financing tools are available to them and how to get them. I don’t see that changing any time soon.
It is a complex dilemma, and most business owners really are not sure about what their financial numbers mean anyway. Most business owners don’t understand that part of having a healthy cash reserve is having a healthy number of options for obtaining capital.
You can call us any time for an assessment and further consultation on finding the business capital you need and other issues that may arise as you continue to build your business in value.
In the meantime, remember your mother-in-law. Thinking about borrowing money from her or someone like her may give you the just-right approach to the bankers and investors you need for your business.