Posted by JuJuan Buford @JSBUFORD
It is not uncommon to hear news and political pundits, academics, and social media personalities profess that there has never been a better time to be a job seeker or an entrepreneur in the United States. There is a lot of truth to this assessment, given that between 2007 and 2017, minority-owned small businesses grew by 79%, about 10 times faster than the overall growth rate for U.S. small businesses during the same time frame.
FEAR OF HITTING THE GO BUTTON ON THEIR DREAMS
Still, there is still a considerable degree of frustration and disenchantment regarding the challenges of acquiring capital - specifically among minorities - to grow and scale their enterprises. Minority-owned businesses are much less likely to be approved for small business loans than white-owned businesses. And are more likely to receive lower amounts and higher interest rates.
Many would be entrepreneurs never “hit the go button” because of fears that their less than perfect credit will prevent them from being able to acquire capital. Writing business plans or securing business planning services can be laborious and costly. Too many are ill prepared to approach a bank or conventional lender, micro-lender, or alternative lending resources, resulting in a kind of mysticism regarding business planning and access to financial resources. However, these challenges are not insurmountable, and provided the proper guidance business owners can begin to make significant strides in the right direction.
BANKING & LENDING PROFESSIONALS CAN BE YOUR FRIEND
One of the most critical steps a fledgling or established business owner can take is to consult with a bank officer or micro-lending consultant first before applying. Tina Williams, business plan writer and Chief Operations Officer of QT Business Solutions, shares that too often entrepreneurs fail to look at their application through the lens of the lender. “Yes, they have a great idea, yes, their product or service is great to them but does the business plan or financial plan show that they have planned for every possible expense and demonstrate that they will have the ability to pay the loan back to the lender?”
Williams also indicated another mistake that entrepreneurs make is not including how much they intend to pay themselves in their business plan. If you are not paying yourself what is the incentive to pay the lender back? Also, entrepreneurs forget to put a viable marketing plan in their business plans. Word of mouth is great but is not a viable marketing plan.
Another important step would be to prepare financially before you launch your business, just as you would prepare to purchase a home: saving money, eliminating debt, and building up assets. Arlena Minter, an Assistant Vice President of Level One Bank shares that another error entrepreneurs make is being unwilling to fund or having no collateral. “In banking, we know we are already taking a risk. However, we feel more confident in a business that is willing to take a risk with us. If the owner doesn’t believe in the company, there is not a lot of motivation for the bank to believe in them either.”
Additionally, Minter addressed the practice of not been keeping accurate records, or efforts to make a business not look profitable to avoid paying additional taxes can be an error in judgement as well. “While the business may significantly reduced their tax obligations, if it appears they have taken too many losses, it is difficult to determine if they will be able to repay a debt.
WHEN SEEKING FINANCING, ONE SIZE DOES NOT FIT ALL
It is important to surround yourself with professionals who are fluent and have had success helping others in the areas where you require assistance. It is also important to attend multiple workshops and panel discussions, participate in business support groups, and understand that while you may not be an expert, it is important that you understand the process in order to make important, critical decisions. Too often entrepreneurs rely on the opinions and insights of friends and family or the grapevine. However, every entrepreneur brings different resources and challenges to the table, and depending on the industry, the mission and priorities of the lender, and the prevailing economic winds, the same approach that worked for one business may not work for another.
While we may be living in the best of times to be an entrepreneur, we are also living in rapidly changing and chaotic times as well. Entrepreneurship is empowerment and has been a staple of the African American community from the beginning. There is still so much information that needs to be shared, and so many incredible opportunities and success stories being created everyday. To be continued….
JuJuan Buford is a Detroit native, entrepreneur, business development professional, and writer dedicated to helping families, entrepreneurs, and business owners establish thriving enterprises, achieve financial independence, and build lives of satisfaction.
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