Business Owners: Why Your Financial Statements Are Important

By Karlene Sinclair-Robinson

In today's business financial market, it is important to understand what bankers and other financial sources require of business owners. When accessing capital through traditional sources such as banking institutions, they must have specific financial documents from the party seeking to borrow their funds.

If these financial documents are not in place, then there really is no way to access the financing you need for your business. Imagine what will happen if you cannot access the money you need to grow your business or for survival. What would you have to do? Lay off employees? Cancel a prominent client? Close your business? These are important questions to consider, so get it together.

You must have some of the following documents on hand to present to the funding source:

* Current Cash Flow Statement
* Current Balance Sheet
* Current Profit and Loss Statement
* Tax Returns both Business Individual
* Current Accounts Receivable Aging Report
* Current Accounts Payable Aging Report
* Bank Statements
* Merchant Processing Statements
* Current Client List

The above list is just a few of the applicable financial documents that a financing source can ask for. If you are unable to present them, this will certainly create a problem for you accessing capital. This is the case whether you are seeking traditional financing or using alternative funding or other private sources. These lenders have the right to ask for any documentation they feel necessary to make the transaction viable for them.

Remember, it is not “What’s in it for me”; it is “What’s in it for them”. You are the one seeking their money and though they might be more than willing to finance you, they are not willing to risk their capital when they know from the get go that you are not up to speed with your documentation.

So, for those business owners who think you can access capital by the seat of your pants that is not going to work. Make sure to have your documents in order to present when you decide to borrow other people’s money. Remember, it is their money and they are the one taking on the risk to fund you. Be sure to get it together.

Small Business Owners: Failing Is Not An Option!

In today's business climate, if you are not as savvy or in the know, you might as well call it quits. For your business to succeed, you must know all the key areas of your business inside out. If you don't know those areas, then you must have staff that is qualified to do the work and more.

SBA statistics show that over 90% of start up businesses fail in the first year. Why is this the case? This happens for a number of reasons. Let's look at a short list:
* Business Owner's experience
* Financial situation
* External Factors
* Internal Factors

The short list above can be broken down based on the individual business owner. Looking at the list brings to mind that there might not be enough capital to operate the business prior to profit being made, that is, after gross income minus all expenses, taxes, and other financial obligations. It also brings to mind the fact that the business owner might not have prepared for the external and internal factors that can affect a business from staffing, timing, obligations, mandatory requirements, and more.

Assessing your business model, business plan, marketing plan, human resources (internal and external), and your personal and business financial position is extremely important. You need to ascertain whether you are in the right industry for your skill set, or if you need to improve your job force. This is where a personal skills assessment would certainly come in handy. This would include your skills, strengths, weaknesses, and much more. It would help you figure out whether you are in the right business or if you should be doing something else.

Access to capital is another major contributor to start-up businesses failing so quickly. You must determine if capital resources are a positive or negative factor. Know how you will gain access to capital through a variety of methods as this will assist you in staying in business longer.

Written by: Karlene Sinclair-Robinson
Author of The Small Business Owner's Guide To Alternative Funding