Five Reasons Your Borrowing will Crash Your Small Business

A car crash on Jagtvej in Copenhagen, Denmark.

Image via Wikipedia

Is your small business failing because of one of these top ten reasons?  The New York Times article might help you wake up.  Maybe there’s still time to save your small business.  Maybe not.  Don’t give up yet.

If you are making big borrowing mistakes here are some tips to steer clear of a financial collision.

1.  Are you trying to make a market with leverage?  Borrowing can’t create demand for your product or service.  Business loans can only create positive or negative leverage.  If you operate at a net loss the sword of negative leverage will cut deep.

2.  Are you trying to sustain a hurdle sales growth rate by piling on the debt?  Expanding into markets that return poor margins is like filling your business gas tank with dirty fuel.  Make sure you drive your borrowing chariot like a financial gladiator by avoiding the most common borrowing mistakes.

3.  Represent yourself well.  Remember who you are and where you came from.  You need to be able to show that to your banker too.  Spend the time and money to have a professionally prepared business plan and financial statements.

4.  Don’t run out of gas with your cash balance.  If you get into financial trouble from an unexpected event like an important customer bailing out or the death of key person in the company your financial legacy will be impacted.  Someone will have to walk in your financial boots after you are gone.  Leave a strong financial legacy.

5.  If you are not a good borrower, get help! Find someone who has strong borrowing experience and can steer you through strategic borrowing.

You have to know what you don’t know.  Take a long weekend away from your business to get some perspective on how you can correct the skid of borrowing mistakes before your business becomes a pile of junk.

Where is your business blind spot?

Advertisements

About Michael Shelton

Your Business Coach Facilitating Delegation and Work Group Engagement Michael Shelton has over twenty-five years of business and military accomplishments, including extensive experience with one of the largest, publicly traded real estate investment trusts (REIT). He is a qualified business coach with assignments in cross-functional work group management, strategic planning, unit leadership, joint venture acquisitions, executive education, mentoring, training and merger integration. Michael has accumulated best practices for building committed work groups from more than $4 billion of capital markets transactions and commercial property development. He served as a commissioned officer and helicopter pilot in the U.S. Army, and earned his MBA from The University of Arizona. Michael has served as a major conference panelist and is the author of Cash Flow Rich, Winning Ways to Evaluate and Finance Real Estate. Today, he helps business owners get more work group engagement as President and CEO of Shelton Business Services, LLC in Scottsdale, Arizona. Disclaimer: I don't offer investment, legal or tax advice. Talk to your broker, accountant or lawyer for investment, tax and legal help. I might own stock in the companies I mention on-line. My posts, tweets and other on-line activity are my personal thoughts and don't represent my employer or company.
This entry was posted in Borrowing, Business Borrowers, Debt, Strategic Planning and tagged , , , , , . Bookmark the permalink.