There are so many moving parts in running and building a business that need to go right in order for the business to be deemed successful. The right financing can help strengthen any sized business and every business could afford to be stronger, especially post COVID. Whether your business is 20 or 2 years old, as a business owner you know, or are starting to realize that access to capital is crucial to empower your business. Debt is not bad, as long as there is a cost effective and reasonable way to payback the debt while at the same time using the money to grow the business. The right financing can bring your business to a super profitable level, but the wrong type of financing can hinder growth and break your business.
The best financing for a business is a revolving line of credit, because of its low cost, flexibility and perpetual access.
OPM or Other People’s Money, specifically Bank Money has built countless businesses, but businesses sometimes fail. Even though it may not be a direct result of the financing, the reason could be the lack of financing. Everyday across this country small businesses fail. There are a million reasons why a business fails. The number one reason is lack of sales, which may be due to incorrect financing . The business did not sell enough product or service at prices high enough to cover expenses and realize a profit. If a business’ debt servicing is over or barely under the profitability mark, there is a chance that the business will not survive. For example: If a business consistently runs at 15% Net Profitability and Grosses $100,000 per month, the total monthly payments should not exceed $15,000. This will mean that the company is no longer profitable. When the cost of capital/debt servicing is too high, other bills are often neglected and the business can’t expand. There is an old saying, ‘‘If you're not growing, you're dying’. This is one of the key points of how bad or no financing can affect a business and leave it vulnerable for failure.
