Every business has to struggle to break free from their comfort zone to maximize potential. This requires taking calculated risks and learning new skills.
Based on your Business Assessment Scores, it would appear that you are in this phase of development. In order to grow to your maximum potential, you may need to step outside your comfort zone and try new things.
We want to introduce you to Donna, who may have been experiencing the same challenges you might be facing now.
Donna is a delight to be around. She is a licensed massage therapist (LMT) who built her business from a one-table/one LMT studio into a 10-table/15 LMT business over the past 7 years. She had built a very successful formula and brand at this location and had outgrown her space. She knew she needed to expand, but she wasn’t 100% sure exactly how best to go about it.
Ms. Donovan was cautious with her spending. While she was an amazing businesswoman with phenomenal intuitive business skills, she didn’t have any formal business training. So, “banking stuff” took her out of her comfort zone.
How We Helped Donna
So, we asked her, “Do you have a finance degree?”. To which, she replied, “No”.
So, I said, “Cut yourself some slack, we’ll figure it out”
All professionals speak in code. It’s not intentional. It’s just how they were taught. After using it so much, they forget that it’s not the way most people speak. Even when confronted and confused by other professional jargon, they fail to recognize it. A doctor is likely as confused by banker-speak as a banker is by doctor speak. And Donna didn’t know the language of loans.
So, here’s what we did. First, we worked with Ms. Donovan to pull together her financial documents. She knew how to pull the reports from Quickbooks, so she provided us with her Profit & Loss Statement, her cash flow statement, and her balance sheet. Then we prepared for her to seek a loan.
3 Key Questions When Seeking a Loan
We made out a budget of all the things that she needed: tables, equipment, computers, rent, payroll, etc. When we added it all up, it came to $100,000.
It was a mix of fixed assets (equipment, tables, etc.) and start-up expenses. The fixed assets are good for a loan. Why? Because they can be used as collateral. The expenses were better suited for a line of credit. Why? A line of credit is like a credit card. You use it when you need it. Since she didn’t need all the money upfront, why pay the interest on it? She could draw from it as she needed it and pay it back as quickly as she wanted
She was thinking of expanding within the next six months so we had time.
With this information, we could explore which options were best for her. First, since she was profitable, been in business for more than 2 years, and had a good credit score, she was a great candidate for an SBA loan and SBA backed line of credit.
Why both small business loans? Well, Ms. Donovan was concerned about the personal guarantee and the risk to her personal assets, a completely normal concern when trying to grow capital. By using the loan for fixed assets, the assets could be used as collateral. This reduced her exposure. Then, with an SBA backed line of credit, she was in control of the money she withdrew, lessening her risk.
We prepared her application and went with her to the bank. The bank was impressed with her application and she was approved within 10 weeks.
I’m happy to say that Ms. Donovan has not only expanded to one new location, but she has now expanded to three. We are so proud of her successes.