Leave it to Jason Zweig, the Wall Street Journal columnist who writes “The Intelligent Investor” each week, to deliver a tongue-in-cheek dictionary of what everyone should know about finance and money.
Zweig’s “The Devil’s Financial Dictionary” is a riff on the 1906 classic by Ambrose Bierce, an American satirist who took the same incisive, stinging approach to defining cultural trends and terms of his day.
As Zweig’s book hits the shelves – the Kindle release was on October 13, with the hardcopy volume due on November 17 – some early reviews point to the diversity of its topics: financial history, Wall Street criticisms, pithy sayings, personality profiles, almost a Farmer’s Almanac for understanding investment.
“The result consistently yields pleasure and insight,” write Gene Epstein and reviewer Martin Fridson for Barron’s. “This book’s intent is not only to amuse, but also to educate its readers,” writes Muhammed Hassanali for Manhattan Book Review. While Zweig’s work has been as well received as some of his prior offerings, it’s still hard for many business owners to think finance is all that amusing or pleasurable.
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So where do business startups get Main Street money? Just as important, where are they getting their money advice? One 2014 survey, designed to explore the appeal of the crowdfunding option, found that almost 60 percent of the global entrepreneurs who responded had no other sources of capital to fund their launch – and that included a similar number whose own assets weren’t yet committed to the mix.
Small business or bank loans, business credit cards, and other sources present an oft-confusing array of options to sift through, and that’s if you can get them. There is no shortage of Faustian bargains among some lenders and their practices, there is often plenty of devil in the details, and it’s no wonder business owners feel that Zweig may be right about that finance-in-hell thing. That’s where better angels matter.
While some startups can reasonably expect those angels to appear with plenty of investment cash, it’s not likely for everyone, at least in the short term. Many entrepreneurs fail to recognize that the good advice begins with you, and the angel’s on your own shoulder. Your energy, ideas and innovation are the momentum that drives you and your enterprise forward, through all of those long days and work nights.
But the good financial decisions that come with good advice, for owners and potential investors alike, are based on good information. There aren’t any shortcuts for getting that information, grounding it in reality and basing practical business finance and other business development decisions on the data.
Beginning with clarity also means beginning with direct answers to simple questions. What do you need the money for? Is it to cover ongoing operations after launch, to address legal or regulatory expenses that you failed to consider or subsequently emerged, is it to invest in new equipment or an expansion? The answer leads to more questions, and it also leads to an evaluation of which options – a short term loan, a credit card, a refinance – are not just available to you but are the best solution fit to the funding.
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Selecting the right option will depend on when you need the money, how long you’ll need to pay it back, and how you expect the business to perform during that time frame, factoring for any changes that the business financing is meant to support in the first place. It also obviously depends on your existing debt structure and obligations, the kind of leasing or mortgage agreements you have, what payroll looks like.
Your financing success also needs to consider the realities of the national economy. Small business lending in the United States has never fully recovered since the recession, even as small businesses themselves have struggled more to regain the ground they lost during the economic downturn – and there’s been an overall small business decline since. That’s why some lawmakers and community lending advocates are appealing for help for business owners who face small business lending barriers.
Your success in securing business credit also may need to consider the overall credit health of your community, which is available through a new “financial resiliency” measure introduced by the New York Fed’s Community Credit project. Although the model is based on the credit behavior and profile of a community’s adults in households, it offers a portrait – down to the county level – of the overall credit health of a community and seeks to answer questions about credit inclusion and credit stress in an area. Crunching the numbers and doing the research will put you in the best position to understand what your business loan should look like, and how realistic your expectations are within the wider credit context.
That final step is to choose a product – bank loan, alternative lender – that represents your best chance for success, but now comes the part that business owners may find the most demonic: the paperwork.
Give yourself the best chance for securing your funds by making sure that lenders have everything they need to make a good decision in your favor. Dot every “I” and cross every “T” as you confirm that your application information is thorough. If you have less-than-perfect history to explain, anticipate those questions and how you’ll address them. Above all, be responsive to your potential financing sources.
Alternative lending options have become more popular, especially as traditional bank loans have become harder for small business to secure – even with the more relaxed credit compared with a few years ago. One option is to contact local lenders, who are more likely to know your story and business position and understand that community context. A local lender isn’t just a source for funding but is also more likely to have an investment in offering you that sound advice about your finance decisions.
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Short term loans from reliable lenders are readily available too, but likely carry higher interest rates, and – as Zweig himself points out – some of those online small business loans are sold to direct-lending funds that connect Main Street back to Wall Street. So the best strategy in securing that loan is to remember that the devil is, indeed, in the details and choose a product that best suits your needs and that of your growing business. It still won’t be amusing, but it will position you for business success!