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finance manager


No small business (under 500 employees) owner has a degree in finance unless their business is in the financial sector. Most small business owners that I have had the privilege of working with have no ideas how to properly finance their business. Credit cards, finance companies, Uncle George, and supplier financing are common methods. Sometimes companies have needed bank financing and have learned (often the hard way) how to get money from banks. The SBA offers programs, but so many are afraid to get involved with the government. Partners or shareholders provide a fantastic way to finance growth, but that process can be filled with peril.

Seed Money

When starting out, the vast majority of companies rely on savings, credit cards, sweat equity, and family and/or friends’ money. Often this seed money is woefully inadequate to cover even the bare minimum of needed equipment, signs, rent, furnishings, inventory, licenses, legal, and deposits necessary to get going.

If you are just starting a company it is fairly easy to avoid the problem of running out of cash in the first year. You need to set up a serious pre-opening budget and an operating budget. You can learn all about setting up those budgets in “When Friday Isn’t Payday.” There are also many other start-up books on the market that will walk you through this process. You might also want to run your plan by a CPA to determine if you are being realistic.


Another common small business problem is not recognizing the cash costs of growth. When you grow, you will commonly need money for inventory, more equipment, accounts receivable, payroll, and more. The need for cash will often come before the cash from a new business is there to pay for the expenses. Companies can go broke from growing too fast.


Companies often experience slow periods. Slower sales might be the result of new competition, regional economic issues, industry recessions, national recessions, the loss of a product line, major customer, or top salesperson.

Most owners fail to cut overhead fast enough to deal with slowdowns. They want to hold on to their staff. They are wary of cutting prices on inventory to raise cash. They are too optimistic about the likelihood of a sales increase coming to save the day. A slow period can easily kill a company.

If you see a slowdown coming, cut fast and mercilessly. Raise cash by collecting receivables and selling off inventory. Go aggressively after new business. Look for opportunities to buy out competitors who didn’t take these steps and got into financial trouble.

Where can I raise money?

Let’s start with some basics. People prefer to loan or invest with companies and owners who don’t need the money. Why? Because those who have money to loan or invest have almost unlimited ways to put their money to work. They are generally using some kind of risk-reward thinking. The more risk the more reward. Therefore, the more you need the money (you are risky) the more you’ll have to pay for the money, assuming you can get anyone to partner with you.

Establish credit lines, partnerships, and investor relationships when you are financially strong

Stop cooking your books to save taxes. If anything, maneuver your books to show more profit, not less.

Grow at a rate that your company can afford. Usually, this means under 30% per year.

Be willing to be “all in.” Bankers and investors like owners who have financial skin in the game. “Why should I invest in you, if you’re not investing in yourself?”

Have really good books that are easy to audit.

Have a formal business plan that indicates you know where you’re going.

Have staff or board members with solid credentials for those areas where you lack credentials.


Character – The books may look great, but the owner has a shady past. On the other hand, the books might look less than perfect, but the owner has a sterling community reputation.

Credit History – Just like a consumer loan, you want to have excellent credit, both the company and the principals

Capacity – Can you pay the loan back. Do you have enough sales, margins, operating profit to pay the loan back as promised? Or for investors, do you have a business plan that will eventually allow them to cash out with substantial gains.

Collateral – If things go south for any reason, does the bank have a way to recover the principle? This might be company assets like real property, equipment, accounts receivable, or inventory. It might require owners to personally guarantee or even provide real estate as backup.

Capital – Does the balance sheet reflect a capital position that shows a company in good standing.

Conditions – What is the state of the industry? How is the economy in general? How might conditions affect future sales and profits?

All of those C’s can be fixed, though some will take longer than others. Being aware of the importance of that list is key.


Banks - For the most part banks are not the primary lenders to very small (under 10 employees) businesses anymore. Some regional banks and credit unions are still interested in smaller companies, but for the most part, banks are looking for companies doing over $5,000,000 in sales.

Square and other online lenders – There is a growing body of online lenders who love very small businesses. Square is considered the major disrupter in this space, but others are figuring out that there are substantial amounts of business to be done with the mom and pop operations of the world.

Collateral lenders – If you have good collateral you can get a loan even if your financials aren’t that great. Most common collateral options would be real estate, equipment, receivables, inventory, and purchase orders. Banks do collateral loans, but for very small businesses, there are companies that specialize in collateral loans. You may want to talk to a loan broker for information about these types of loans.

SBA – The SBA guarantees loans made by other institutions. Their credit requirements aren’t as rigorous, and their terms are generally more generous. Banks commonly have someone on staff who specializes in SBA loans. There are business loan companies who also help companies secure SBA financing.

Partners – Bringing on a partner, whether an active or passive partner, can be a great way to increase both the financial strength of a company, but also add intellectual capital. When the partner is active, you will generally be adding new skill sets, too.

Choosing a partner is almost like choosing a spouse. There are many pros and cons. Many enter into the new relationship hastily and soon regret it. It can be bliss when it works.

Investors – Small companies can use LLC’s or other corporate structures to bring in investors. These investors are most often passive and are likely to be close associates of the ownership. In larger deals, the investors might join based on relationships with professionals hired to sell the stock.

Having stockholders is a fantastic way to bring larger amounts of capital into the company for growth. Having stockholders adds layers of regulations and accountability that can be frustrating.

Crowdfunding – There are two crowdfunding methods. Through Kickstarter or other online resources, you can take a product to market when it is merely a drawing or just in prototype. If the visitors to Kickstarter like your item, they may buy one or many. The funds are distributed to you at the end of the campaign. Your only obligation to these consumers is a good faith effort to deliver the goods.

Equity crowdfunding is a method of raising up to $1,070,000 per year from non-qualified investors through a website such as You create a pitch for your company, including historic and forward-looking financial, you make an offer to sell shares at a certain price, and when you attempt to send individuals to the site through advertising and social media.

StartEngine or similar sites also have a built-in crowd of folks looking for cool companies to invest in. Between your effort and theirs, you will raise up to $1,070,000 depending on how well your offer is received by those who take a look.

To improve your chances of success on any crowdfunding effort, you will benefit from getting more eyeballs on your offer. Several companies including can help you with your effort.

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