October 27, 2009
This blog is about:
- Both the technical and counselor dimensions of the capabilities lawyers’ bring to entrepreneurs and their companies;
- How the two dimensions can interact to create more productive client-attorney relationships; and
- How this can be accomplished within a fair and prudent cost structure.
Posts focus on subjects such as:
- The legal side of issues that some entrepreneurs might think are purely business issues;
- The business side of issues that some entrepreneurs might think are purely legal points;
- Eliminating the billable hour as a barrier between entrepreneurs and their attorneys;
- Other information that I think may be valuable to entrepreneurs.
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Small Business Credit | 
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Posted by ankarlen1215
January 25, 2010
When the bank says no to a request for small business capital, the next call is frequently to mom and dad. Many parents are unprepared for the ensuing business, financial and emotional challenges.
The nature of those challenges varies with the circumstances and parent-child relationship. Here are five general areas of inquiry to help parents sort-out the issues:
- What is your child asking for? Parents should first determine the seriousness of the child’s financial situation. Is money for living expenses needed before the business loan can be addressed? The child should provide a detailed explanation including the amount needed, the intended uses and how and when it will be repaid.
- Can you afford to make the loan? The child should be told up front if the parents lack the wherewithal to fund the loan or if they can’t fund the amount requested. Parents should consider how the loan would impact their lifestyle, in the short run, long run and, in the event of illness or death or if it is not repaid.
- Is it prudent to lend your child money for this purpose? Lacking the skills, experience, resources and objectivity necessary to evaluate the financing request, parents should not make a decision until a business plan has been vetted. If necessary, it should be explained to the child that pressure, such as “you don’t trust [or have confidence in] me,” or “if I lose this deal it will be your fault” only delay the process. Parents should also be wary if there is any history of deception, unreliability or dishonesty.
- Is lending the money the best way to help? If parents conclude that the business plan is faulty or that the child is not well suited for entrepreneurship, extending the loan would only set the child up for failure. Instead, they should explore other avenues of helping. Blaming past failures on circumstances or others may signal that the child has not learned from past experiences.
- What criteria will you use to decide? Chances are that the parents will make their decision based on some combination of business criteria and love for their child. Also, a parent may want to consider the interests of other stakeholders, such as other children or a spouse if the parent is in a second or later marriage. The criteria should be established and clearly communicated to the child.
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Posted by ankarlen1215
November 24, 2009
The annual lighting of the Rockefeller Center Christmas Tree signals the beginning of the holiday season. In contrast, the end of the recession will not come in a single, dramatic moment. Comforting as statistical pronouncements may be, the “ah-ha moment” for each entrepreneur will be a feeling of empowerment to resume his or her business and economic lives.
The recession’s legacy will include new and changed regulations, business practices and ways of doing business. Decisions will be multi-faceted, including legal components. For example, I foresee small businesses forming strategic alliances to increase capacity and share risks. The analysis, negotiation and preparation of legal documents for this and countless other kinds of transactions will be more complex than ever before. In addition, previously routine transactions will become more complicated as parties seek to avoid repeating pre-recession mistakes.
There will be a heightened need for business owners to have close-by a counselor at law who is familiar with the client’s business and industry, has represented numerous other businesses, knows the regional business environment, understand the synergy between the client’s business and legal issues, possesses well-developed analytical skills, and has the ability to ask incisive questions that identify business risks and illuminate solutions and opportunities.
It is precisely this kind of relationship that the billable hour has kept beyond the reach of many entrepreneurs. Another legacy of the recession should be new relationships that allow entrepreneurs and their business attorneys to focus on the matter rather than the meter.
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Posted by ankarlen1215
October 27, 2009
Mutual Trust. Number-crunching doesn’t always tell the entire story. For the owner of a small business seeking a line of credit, a strong relationship with the bank’s Relationship Managers (RM) is critical. RMs are much more likely support a company’s financing requests if they know and trust the people behind that company. Similarly, business owners need to know that their RM will offer support when needed. Always be open, honest and complete with your RM.
Competence. Clearly state the amount requested and its intended use. If potential future needs are of concern, ask about building increases into your line of credit for future growth when you need it and can make a sound business case for it. Don’t ask for more than you realistically need just because you think you can qualify for it or “in case” you need it. Such requests can raise doubts about your ability to manage credit and make it harder for the RM to justify your request by
Professionalism. A CPA with expertise in preparing and presenting loan packages will know how to present information in the most favorable light (without in any way sacrificing accuracy). In addition, by retaining the CPA, you distinguish your small businesses from others by tangibly demonstrating that you do things right and are respectful of RM’s time.
Responsiveness. Return the RM’s calls. Believe it or not, some customers don’t. Don’t be annoyed when the RM requests additional information. A request for more information is very often a positive sign. Supply requested information promptly.
RM as a Resource. Avoid insisting on a pre-conceived financing structure. The RM may make valuable suggestions such as leasing, rather than borrowing to purchase equipment and other things. If you are denied credit or approved for less than requested, a debriefing with the RM can help you understand why and how to fix the problem.
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Posted by ankarlen1215
