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Title: Steps to Success: An E-Book on How to Fund a Small Business
Author: Cristin Dempsey, Business Writing intern at Tourbillon Alliance Partners
Date: Wednesday, August 27, 2014 (Dave- This is a prospective date of
completion…after all drafts, revisions, and images are done)
Submitted to: All colleagues at Tourbillon Alliance Partners, plus those looking to
start or have recently started a small business
Purpose: The purpose of this e-book is to inform readers on how to start and a
small business and receive funding in order to make their business successful.
Abstract:
This collection of e-book writings discusses the topic of small business funding and everything
that goes into it. Most small businesses do not start out with a capital reserve; and therefore,
they need the appropriate funding from banks to “get their feet wet.” Unfortunately, many of
these funding requests are denied by banks each year due to lack of collateral, profit, or
interest in the first several months of operation, so it is the small business’s mission to make
enough profit and attract enough consumers to get some assistance. They must think about the
huge commitment a small business is first and that it requires a lot of money for even the
smallest of things, such as electricity or parking. The funding may not always seem like a lot, but
it can be a good start for a bright future. It can go towards things like product samples, specials,
and making the facility appealing to the general public that will go there in the near future.
Many small businesses are only known in a single community, but their success in that one
community can still make a big impact for years to come as they continue to grow and improve.
Keywords:
Small, business, funding, banks, loans, equipment, leasing, working, capital,
marketing, commercial, real, estate, profit, customers, success
Steps to Success: An E-book on How to Fund a Small Business
Introduction
Did you know last year, over 38 million Americans owned a small business? Owning a small
business, especially in a small town, is constantly growing in popularity because of the various
values and opportunities it presents for the owner or manager. In order for these small businesses
to thrive, owners and managers need to start with some sort of funding. Small business funding is
an essential element for success that is not always easy to attain. Luckily, with the assistance and
advice of many companies and banks, small business funding is becoming much easier to
achieve. Using these resources, small businesses will be able to see success and opportunity for
their customers.
Chapter One: Getting Started
Starting a small business is great and can lead to several opportunities in the future, but
funding can be difficult to come by. According to Tourbillon’s Small Business Funding page,
most banks and loan companies do not grant funding
for the first six months of a small business’s existence.
Because of this, it is up to the small business to bring
in enough profit during those first six months. They
can offer presales of the product or service to get
consumers interested, or they can even ask for loans
from family and friends. It may not make a lot of
money at first, but it is a good start.
Before applying for funding, every small business
needs to consider every aspect of a business that they
must pay for. Not only do they have to consider costs
for their building or manufacturing the product, there
are several other essential costs as well. Depending on the location of their business, they might
have to pay more if it is in a busy area, such as a downtown. If a particular small business starts
out with a very small amount of money, it may be best to settle in a more inexpensive location,
such as near a residential neighborhood or the outskirts of a town. Even the seemingly smallest
aspects, such as electricity, water and furniture, should be factored in to the total cost. It is up to
the small business owner to decide what is absolutely necessary for the first six months.
Many small businesses start out with only a small amount of money, so a marketing budget is
likely to be nonexistent. However, that is not something to worry about. The most important
audience to promote to is the local community, and that can be done in many, inexpensive ways.
If the company is able to manufacture samples of their product or service to give to family and
friends or as presales, that is typically a good route to go in order to catch the community’s
Figure 1: There are several costs that go
into starting a small business,which is
why funding is essential. (infoverto.com)
attention. They can also put signs up around town, telling people when they officially open,
where they are located, and what they provide for consumers. If local consumers see it, they are
more likely to take advantage of the small business, and if they are satisfied, they are more likely
to inform their friends and family about it. Social media is another great way to get the word out.
Most, if not all, social media accounts are free, so the business can post things like sales,
opportunities, or important dates to remember.
Any money made off of this small-scale advertising can not only go towards products and
services, but towards gaining more employees who will also promote the small business. From
there, friendly and helpful service will lead to a larger profit margin, and this will prove to banks
and loan companies that the small business is successful and has a future in the community.
Therefore, they will know that the owner and employees are devoted to the business and deserve
the financial assistance that they are looking for. This can lead to being able to provide additional
services, such as more employees and a company website.
Chapter Two: Applying for a Loan
If six months goes by and the
business is still making profit and
attracting customers in the local
community, then it is definitely safe to
apply for a loan. This process may not
always be easy; however, if prepared,
it can be very rewarding in the end.
Three main types of funding that have
briefly been mentioned previously
include working capital, equipment leasing, and
commercial real estate. Each type focuses on a
different aspect of funding, and they are all equally
important when considering necessary funding. Below is a short description of each and why
they are so important to consider.
Working Capital
Working Capital is not exactly a “household term,” but in order to be successful with a small
business, one must understand its general idea and the common goal it tries to achieve. Simply
put, working capital is the money a business needs to keep operating. An example of this is a
seasonal business, such as a ski resort or a landscaping service. They are only actively serving
customers and bringing in profit one or two seasons per year, so it is up to the business to find
ways to keep receiving money during the off-season. This can include things such as fundraisers,
Figure 2: This is a list of important
questions to considerwhen applying for a
loan. (tourbillonalliance.com)
limited time offers (such as selling ski equipment or products for landscaping), or selling any
merchandise in the community (such as at sporting events).
Equipment Leasing
Even a small business in a small community requires several pieces of equipment to run
successfully. The business will not often be able to afford all equipment, so it is important to
only purchase the equipment absolutely necessary for operation, such as products, services, and
employees. Otherwise, it is the business’s job to lease whatever will be too expensive to
purchase. This can include furniture, cash registers, employee uniforms, or utensils.
Commercial Real-Estate
Commercial Real-Estate focuses on the location and facility where the business runs. In many
areas, certain locations and types of buildings work best for a specific type of business. For
example, a shop or restaurant would work best in a busy area of a town and may need a bigger
building to serve more customers at one time. It is up to the business to decide what their
priorities are and how to address them. Commercial Real-Estate can be a process that can take up
to several months and lead to competition However, if the business works with a realtor and
keeps their options open, finding a location to run their business at will become a reality.
According to Jesse Aaron in “Vital Small Business Statistics, Trends and Facts for 2014,” over
fifty percent of Americans either own or work for a small business. This overwhelmingly large
statistic further proves that not all loan applications go unnoticed. Sure, not every bank or
funding company is going to grant a loan to every small business that applies. But on the other
hand, nothing will happen if the owner or manager does not keep applying to different places.
They should think of it almost as a second job, getting in as many applications as they can so
they come out with adequate funding. According to smallbusinessfunding.com, many
applications for funding created today are easy and straight-forward in order for the bank to
acknowledge the most important needs of the business. They also state that many of these
applications are also free or of little charge, yet they can offer anywhere from $2,500 up to
$500,000 for a small business.
Chapter Three: Working Capital-An In-Depth Approach
When someone hears “small business,” they probably think of a local restaurant or downtown
shop. In most cases, they would be correct. According to Tourbillon Alliance Partners, almost
half of all small businesses include consumer-friendly locations such as shops or restaurants.
Many of these businesses are open year-round, yet others are not, especially if they are in a
location notorious for its extreme weather conditions during the winter or summer months.
Mostly they sell food, products, or services specific to a season and would not earn profit during
the off-season, but other times, the business can be simply just too hard to get to or mostly
popular with “vacationers.” Even if it is year-round, the business may still have to shut down
periodically for renovations or change their hours if they are not as busy. Whatever the case may
be, the goal for these businesses is to achieve working capital, or find a way to earn money
during the off-season.
One example of a business that strives to achieve working capital is the resort I work at,
Arrowwood Resort and Conference Center. It is a well-known resort in Minnesota, although it is
run in only one location by mostly local residents. Despite the harsh Minnesota winters,
Arrowwood operates year-round, but many of its departments are seasonal. Examples of seasonal
departments include the Marina, the outdoor restaurant (Deck Bar and Grill), and the Snow
Center. Most of the staff at the Marina and Deck Bar is comprised of high school and college
students seeking summer employment, so the resort does not have to pay them year-round. The
head of each department is able to find a job within the resort during the off-season in more
demanding departments, such as housekeeping or the front desk. As for the profit they bring in
with these departments, it is true that Arrowwood brings in more summer guests than winter
guests. However, they still aim to keep up with incoming profit in the winter by offering deals,
hosting conferences, and opening the Snow Center to offer winter activities. They do not let
fewer guests bring down the quality of their business.
Another example is a local theater that puts on only summer performances. They are seasonal,
mostly because of their remote location and the fact that most actors are also college students.
They do not have to worry about paying actors during the off-season, but they do have to worry
about bringing in enough profit for the theater itself. Since they have been open for a long time,
they are able to do sponsorships and fundraisers
at sporting events to stay in peoples’ minds.
Many new businesses do not have the money to
sponsor an event, but they do have the option of
selling any leftover products from the season at
local sporting or community events. The most
popular option is selling food since people are
lured in by the smell, so that is always a good
route to go. However, if the off-season does not
allow the budget for food, it can also work to
sell products that people will absolutely need, such
as lawn mowers, air conditioners, or furniture.
However, many small businesses are also open year-round. An example of this is a hair or
nail salon. Several towns have nail or hair salons, but a lot of these are not chains. People want to
be able to trust these salons in order to look good, afford their services, and be able to find them.
Many salons will offer discounts for students or seasonal discounts, such as during wedding
season when demand is higher. Even when it is not wedding season, there are still school dances,
family events, and preparation for spring where customers will bring in business. If the salon can
prove that they provide great service with great attention to detail and friendly service, customers
Figure 3: This image shows the different
elements that go into working capital
alone. (smallbusiness.wa.gov.au)
will refer it to their family and friends. Even if the salon is in a less convenient location,
discounts, signs, and great service will keep their business not only running, but also thriving for
many years into the future.
Even if a business is open year-round, it is likely that they will run into a situation after
several years in which part or all of their building needs to be renovated. Many of these
businesses have major sales in order to remove all their existing products to make way for
renovation. That usually draws customers in, but the main challenge is how to keep the incoming
profit coming in during whatever time window they must face. They can move to a temporary
location (even if that means sharing a building with another business), keep selling products at
community events, or possibly selling products online (although they must remember to factor in
shipping costs).
Chapter Four: Equipment Leasing- An In-Depth Approach
As mentioned before, small businesses, especially new small businesses, cannot afford the
full cost of every single piece of equipment that they need. That is why equipment leasing has
become a popular option
among small businesses. According to Tourbillon Small Business Funding Tips, instead of
making the full payment up front, the small business will be able to pay a monthly fraction of the
total payment. After a certain amount of time, they can decide whether to purchase the piece of
equipment to own or give it back and lease another piece of equipment. While they do not
actually own that piece of equipment, the benefit to this deal is that if a more improved version
of it comes out, they can choose to start leasing that instead at the end of the month. They will
not have to try and sell an outdated product or service.
The first thing a small business must do before leasing equipment is to decide what equipment
they need the most and must purchase. This includes water, electricity, employees, and
insurance. Once that is determined, most other equipment can be leased. The equipment that is
leased the most includes computers, printers, and copiers. However, it can also include
equipment such as employee uniforms, cash registers, or appliances (kitchen or outdoor). These
types of equipment change and improve frequently, and soon enough, anything like this
purchased for the business will be outdated or not able to run properly and in need of a
replacement. That is why equipment leasing will come in handy, for the business will be able to
keep up with these changes and improvements mush
easier.
The next thing a small business must do before
leasing equipment is to determine just how long they
intend to lease. The time frame will be likely to vary
depending on the product or piece of equipment. For
example, stoves or dishwashers will last at least five
Figure 4: This pie chart outlines how
popular equipment leasing is and business
owners’ willingness to do it again.
(leasingservices.biz)
to ten years before they must be replaced. However, furniture, such as tables, chairs, or desks,
will last much longer than that, even over 20 years. If a certain type of equipment will be leased
for several years, it might just be better to purchase it. With each year that passes, the business
owner or manager must remember that they need to renew their lease, surrender the equipment,
or finally just purchase it.
The most important aspect to remember about equipment leasing is whether the equipment is
essential to the business or just a desire. It is also important to remember how long equipment
lasts before they break down or become outdated. The equipment that goes out of date the
fastest, such as technology (computers, printers, and copiers), transportation, or kitchen
appliances, should be the first priority for a lease. Other items, such as tables, chairs, or desks,
should be the last priority and could be purchased instead. Equipment leasing versus actually
purchasing equipment is usually less expensive, and regardless of the piece of equipment, it is
the better route to go for a new small business.
Chapter Five: Commercial Real Estate-An In-Depth Approach
Although some small businesses today, including Tourbillon Alliance Partners, conduct all
their business online, most small businesses will want at least one physical building to conduct
business. Just like with equipment, most businesses will want to lease a building instead of build
or purchase their own. The process of leasing a building seems simple enough, but there are
actually many meticulous steps and months that go into the entire process. From meeting with
realtors to attending showings, the commercial real estate process can be exhausting and time
consuming, not to mention competitive. However, it is essential to stay on board no matter how
long it takes, because it will give the best possible results to the small business.
First, the small business owner must do research to determine what buildings are up for lease
and where. Once they find buildings that are for lease, it is important to also research prices of
each building. Even if the price is lower, it is also important to determine what condition the
building and how much renovation would cost. Another building may be a more expensive lease,
but it may also be in better condition and in little need of renovation. Therefore, in the end, the
total cost could possibly be lower than the building with the cheaper lease.
It may also be the case, especially in older
and/or smaller towns, that every building available
for lease is in need of major renovations. Just like with equipment leasing, this owner or manager
then must determine how much renovation is needed per building and what is and is not
necessary. In addition, the cost of total renovations per building and the time it would take per
building to complete those renovations before they can open to the public should be considered.
This alone will be a major factor in which building the small business decides to choose and
operate their business. It is not often in the owner or manager’s control in what condition the
buildings are in.
Once the buildings and prices are researched, it is essential to work with a realtor. They will
have the final say on how much renovation needs to be done to each building and what the total
costs will be. They will also provide tips and advice on the area and what kind of business to
expect from the local community. In addition, the realtor will also schedule showings so small
business owners or managers can see how much space they are working with and whether the
area is easily acceptable for all their business’s needs. Realtors will also help the business owner
or manager determine a budget and make an appropriate offer once they have found the right
building for their area. Other businesses may have better offers, which is why real estate gets so
competitive. That is why there should be plenty of options to choose from, in a few different
communities.
When a building has been selected, it is important to remember how much renovation will
need to be done and when the owner or manager and their employees are able to start moving
equipment in and turning the building into their own. Once that is determined, then they can start
to work with opening dates when their products and services will be available to the public. The
Figure 5: This graph shows the success of
commercial real estate during last year’s
second quarter. (nspireassets.com)
whole process may take up to several months, which is why presales and setting up booths at
local events may be beneficial to the business. It is always good to start making money even
before the business officially opens.
Chapter Six: Several Years into the Future
Working Capital, Equipment Leasing, and Commercial Real Estate are three major and
essential focus areas if a small business owner wishes for success well into the future. While they
are three distinctly different areas, they go hand-in-hand in order to provide the best possible
results for any small business. Incoming profit will always vary depending on where the business
is located, whether they are seasonal or run year-round, and how they obtain and utilize their
necessary equipment. Even if the small business is in a quiet location and only open during two
seasons out of the year, how they approach these three areas can yield success.
However, this success cannot occur unless the small business owner or manager steps up and
takes action. Gaining support from friends and family puts them in a great position to start a
great business. If they promote the business well, their family and friends will be more willing to
contribute to it until funding is available. Presales or samples of the products and services can
also help the business get a jumpstart, since the general public will be more aware of what they
can take away from the business. The owner or manager should then apply for funding when
they find what works best for the business. From there, they can take action to find a location and
necessary equipment.
Years down the road, once the small business has taken off and made a name for themselves,
the owner or manager may want to consider even bigger ways to bring in more profit. One way
is to expand. This can mean adding on to or renovating the current building to add more variety
to the products and services, or it can even mean adding more locations to cater to consumers in
several different communities. This, however, cannot be possible unless the small business is
thriving and bringing in a comfortable amount of profit. That is why it is a goal to work towards.
It may take up to several years, but as long as the original location brings in regular consumers, it
is worth the wait and possible to achieve.
Another way to keep consumers interested in the small business is to update products and
services to keep up with new innovations of the year. For example, if a business sells cosmetics,
they can update their products so that they last longer and highlight certain features on a person’s
face. A great example of a business that must always keep up with new innovations is a business
that sells different types of technology. If a business sells DVD players, they can add extra
features to them, sell players that hold multiple disks, or sell players with a clearer and more
vibrant picture. Updating these products or adding extra features to them may be a hefty expense
and may take a long time to develop, but once they are released, they will keep consumers and
profit coming in.
With a small business, especially one that is slow to
develop, it is oftentimes difficult to support a large
number of employees. There is only so much money
available, but more money in the future means a higher
possibility of hiring. More employees mean more
productivity and more flexible work hours. Employees
of a small business are especially satisfied when they
have a flexible work schedule, and they will be more
likely to recommend the job to any friends looking to
work part-time. As long as there are adolescents and young
adults actively searching for work and ready to provide
friendly, efficient service, the small business will be able to
provide their products or services for many years.
Several different factors go into small business funding in
order to make it effective. At times, especially at first, it can prove to be overwhelming and
challenging. Banks will always have the ability to turn down a new small business looking for
funding. However, if the small business has perseverance, applies to multiple banks or starts with
the help of family and friends, and offers presales or discounts, then they will be more likely to
find success. There are many areas of focus for small business funding, though the three main
ones include working capital, equipment leasing, and commercial real estate. If the small
business owner or manager is only able to focus on these three areas, then they are well on their
way to success.
Figure 6: One way to pay for the
borrowed money is through increased
business. New technologies,such as
these Smart Phones,can help boost sales
for a small business.
(1stwebdesigner.com)
(informationtechnologydivision.com)
Works Cited
Aaron, Jesse. “Vital Small Business Statistics, Trends and Facts for 2014.” GetBusy Media,
Entrepreneurship: 13 February 2014. Web. 30 July 2014.
“Applying for a Loan.” Small Business Funding (smallbusinessfunding.com), Application
Process: 2014. Web. 1 August 2014.
Mullins, Dave. “Tourbillon Small Business Funding Tips,” Tourbillon Alliance Partners
(tourbillonalliance.com), Products and Services, 2013. Web. 3 June 2014.
“Multi-Family Acquisition and Asset Management.” NSpire Assets (nspireassets.com),
Commercial Real-Estate, 2013. Web. 15 August 2014.
“SCM Strategy: Don’t Press Wrong Buttons to Reduce Cash to Cash Cycle.” infoverto.com,
Finance: 2009. Web. 21 August 2014.
“Web Design.” 1stwebdesigner.com, Technology: 2008. Web. 21 August 2014.
“What are the Types of Leases and how do They Work?” LeaseAdvisor (leasingservices.biz),
Equipment Leasing: 23 May 1999. Web. 21 August 2014.
Working Capital Components.” Small Business Development Corporation- Government of
Western Australia (smallbusiness.wa.gov.au), Working Capital: 2014; Western Australia. Web.
15 August 2014.

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Small Business Funding E-book

  • 1. Title: Steps to Success: An E-Book on How to Fund a Small Business Author: Cristin Dempsey, Business Writing intern at Tourbillon Alliance Partners Date: Wednesday, August 27, 2014 (Dave- This is a prospective date of completion…after all drafts, revisions, and images are done) Submitted to: All colleagues at Tourbillon Alliance Partners, plus those looking to start or have recently started a small business Purpose: The purpose of this e-book is to inform readers on how to start and a small business and receive funding in order to make their business successful. Abstract: This collection of e-book writings discusses the topic of small business funding and everything that goes into it. Most small businesses do not start out with a capital reserve; and therefore, they need the appropriate funding from banks to “get their feet wet.” Unfortunately, many of these funding requests are denied by banks each year due to lack of collateral, profit, or interest in the first several months of operation, so it is the small business’s mission to make enough profit and attract enough consumers to get some assistance. They must think about the huge commitment a small business is first and that it requires a lot of money for even the smallest of things, such as electricity or parking. The funding may not always seem like a lot, but it can be a good start for a bright future. It can go towards things like product samples, specials, and making the facility appealing to the general public that will go there in the near future. Many small businesses are only known in a single community, but their success in that one community can still make a big impact for years to come as they continue to grow and improve. Keywords: Small, business, funding, banks, loans, equipment, leasing, working, capital, marketing, commercial, real, estate, profit, customers, success
  • 2. Steps to Success: An E-book on How to Fund a Small Business Introduction Did you know last year, over 38 million Americans owned a small business? Owning a small business, especially in a small town, is constantly growing in popularity because of the various values and opportunities it presents for the owner or manager. In order for these small businesses to thrive, owners and managers need to start with some sort of funding. Small business funding is an essential element for success that is not always easy to attain. Luckily, with the assistance and advice of many companies and banks, small business funding is becoming much easier to achieve. Using these resources, small businesses will be able to see success and opportunity for their customers. Chapter One: Getting Started Starting a small business is great and can lead to several opportunities in the future, but funding can be difficult to come by. According to Tourbillon’s Small Business Funding page, most banks and loan companies do not grant funding for the first six months of a small business’s existence. Because of this, it is up to the small business to bring in enough profit during those first six months. They can offer presales of the product or service to get consumers interested, or they can even ask for loans from family and friends. It may not make a lot of money at first, but it is a good start. Before applying for funding, every small business needs to consider every aspect of a business that they must pay for. Not only do they have to consider costs for their building or manufacturing the product, there are several other essential costs as well. Depending on the location of their business, they might have to pay more if it is in a busy area, such as a downtown. If a particular small business starts out with a very small amount of money, it may be best to settle in a more inexpensive location, such as near a residential neighborhood or the outskirts of a town. Even the seemingly smallest aspects, such as electricity, water and furniture, should be factored in to the total cost. It is up to the small business owner to decide what is absolutely necessary for the first six months. Many small businesses start out with only a small amount of money, so a marketing budget is likely to be nonexistent. However, that is not something to worry about. The most important audience to promote to is the local community, and that can be done in many, inexpensive ways. If the company is able to manufacture samples of their product or service to give to family and friends or as presales, that is typically a good route to go in order to catch the community’s Figure 1: There are several costs that go into starting a small business,which is why funding is essential. (infoverto.com)
  • 3. attention. They can also put signs up around town, telling people when they officially open, where they are located, and what they provide for consumers. If local consumers see it, they are more likely to take advantage of the small business, and if they are satisfied, they are more likely to inform their friends and family about it. Social media is another great way to get the word out. Most, if not all, social media accounts are free, so the business can post things like sales, opportunities, or important dates to remember. Any money made off of this small-scale advertising can not only go towards products and services, but towards gaining more employees who will also promote the small business. From there, friendly and helpful service will lead to a larger profit margin, and this will prove to banks and loan companies that the small business is successful and has a future in the community. Therefore, they will know that the owner and employees are devoted to the business and deserve the financial assistance that they are looking for. This can lead to being able to provide additional services, such as more employees and a company website. Chapter Two: Applying for a Loan If six months goes by and the business is still making profit and attracting customers in the local community, then it is definitely safe to apply for a loan. This process may not always be easy; however, if prepared, it can be very rewarding in the end. Three main types of funding that have briefly been mentioned previously include working capital, equipment leasing, and commercial real estate. Each type focuses on a different aspect of funding, and they are all equally important when considering necessary funding. Below is a short description of each and why they are so important to consider. Working Capital Working Capital is not exactly a “household term,” but in order to be successful with a small business, one must understand its general idea and the common goal it tries to achieve. Simply put, working capital is the money a business needs to keep operating. An example of this is a seasonal business, such as a ski resort or a landscaping service. They are only actively serving customers and bringing in profit one or two seasons per year, so it is up to the business to find ways to keep receiving money during the off-season. This can include things such as fundraisers, Figure 2: This is a list of important questions to considerwhen applying for a loan. (tourbillonalliance.com)
  • 4. limited time offers (such as selling ski equipment or products for landscaping), or selling any merchandise in the community (such as at sporting events). Equipment Leasing Even a small business in a small community requires several pieces of equipment to run successfully. The business will not often be able to afford all equipment, so it is important to only purchase the equipment absolutely necessary for operation, such as products, services, and employees. Otherwise, it is the business’s job to lease whatever will be too expensive to purchase. This can include furniture, cash registers, employee uniforms, or utensils. Commercial Real-Estate Commercial Real-Estate focuses on the location and facility where the business runs. In many areas, certain locations and types of buildings work best for a specific type of business. For example, a shop or restaurant would work best in a busy area of a town and may need a bigger building to serve more customers at one time. It is up to the business to decide what their priorities are and how to address them. Commercial Real-Estate can be a process that can take up to several months and lead to competition However, if the business works with a realtor and keeps their options open, finding a location to run their business at will become a reality. According to Jesse Aaron in “Vital Small Business Statistics, Trends and Facts for 2014,” over fifty percent of Americans either own or work for a small business. This overwhelmingly large statistic further proves that not all loan applications go unnoticed. Sure, not every bank or funding company is going to grant a loan to every small business that applies. But on the other hand, nothing will happen if the owner or manager does not keep applying to different places. They should think of it almost as a second job, getting in as many applications as they can so they come out with adequate funding. According to smallbusinessfunding.com, many applications for funding created today are easy and straight-forward in order for the bank to acknowledge the most important needs of the business. They also state that many of these applications are also free or of little charge, yet they can offer anywhere from $2,500 up to $500,000 for a small business. Chapter Three: Working Capital-An In-Depth Approach When someone hears “small business,” they probably think of a local restaurant or downtown shop. In most cases, they would be correct. According to Tourbillon Alliance Partners, almost half of all small businesses include consumer-friendly locations such as shops or restaurants. Many of these businesses are open year-round, yet others are not, especially if they are in a location notorious for its extreme weather conditions during the winter or summer months. Mostly they sell food, products, or services specific to a season and would not earn profit during the off-season, but other times, the business can be simply just too hard to get to or mostly popular with “vacationers.” Even if it is year-round, the business may still have to shut down
  • 5. periodically for renovations or change their hours if they are not as busy. Whatever the case may be, the goal for these businesses is to achieve working capital, or find a way to earn money during the off-season. One example of a business that strives to achieve working capital is the resort I work at, Arrowwood Resort and Conference Center. It is a well-known resort in Minnesota, although it is run in only one location by mostly local residents. Despite the harsh Minnesota winters, Arrowwood operates year-round, but many of its departments are seasonal. Examples of seasonal departments include the Marina, the outdoor restaurant (Deck Bar and Grill), and the Snow Center. Most of the staff at the Marina and Deck Bar is comprised of high school and college students seeking summer employment, so the resort does not have to pay them year-round. The head of each department is able to find a job within the resort during the off-season in more demanding departments, such as housekeeping or the front desk. As for the profit they bring in with these departments, it is true that Arrowwood brings in more summer guests than winter guests. However, they still aim to keep up with incoming profit in the winter by offering deals, hosting conferences, and opening the Snow Center to offer winter activities. They do not let fewer guests bring down the quality of their business. Another example is a local theater that puts on only summer performances. They are seasonal, mostly because of their remote location and the fact that most actors are also college students. They do not have to worry about paying actors during the off-season, but they do have to worry about bringing in enough profit for the theater itself. Since they have been open for a long time, they are able to do sponsorships and fundraisers at sporting events to stay in peoples’ minds. Many new businesses do not have the money to sponsor an event, but they do have the option of selling any leftover products from the season at local sporting or community events. The most popular option is selling food since people are lured in by the smell, so that is always a good route to go. However, if the off-season does not allow the budget for food, it can also work to sell products that people will absolutely need, such as lawn mowers, air conditioners, or furniture. However, many small businesses are also open year-round. An example of this is a hair or nail salon. Several towns have nail or hair salons, but a lot of these are not chains. People want to be able to trust these salons in order to look good, afford their services, and be able to find them. Many salons will offer discounts for students or seasonal discounts, such as during wedding season when demand is higher. Even when it is not wedding season, there are still school dances, family events, and preparation for spring where customers will bring in business. If the salon can prove that they provide great service with great attention to detail and friendly service, customers Figure 3: This image shows the different elements that go into working capital alone. (smallbusiness.wa.gov.au)
  • 6. will refer it to their family and friends. Even if the salon is in a less convenient location, discounts, signs, and great service will keep their business not only running, but also thriving for many years into the future. Even if a business is open year-round, it is likely that they will run into a situation after several years in which part or all of their building needs to be renovated. Many of these businesses have major sales in order to remove all their existing products to make way for renovation. That usually draws customers in, but the main challenge is how to keep the incoming profit coming in during whatever time window they must face. They can move to a temporary location (even if that means sharing a building with another business), keep selling products at community events, or possibly selling products online (although they must remember to factor in shipping costs). Chapter Four: Equipment Leasing- An In-Depth Approach As mentioned before, small businesses, especially new small businesses, cannot afford the full cost of every single piece of equipment that they need. That is why equipment leasing has become a popular option among small businesses. According to Tourbillon Small Business Funding Tips, instead of making the full payment up front, the small business will be able to pay a monthly fraction of the total payment. After a certain amount of time, they can decide whether to purchase the piece of equipment to own or give it back and lease another piece of equipment. While they do not actually own that piece of equipment, the benefit to this deal is that if a more improved version of it comes out, they can choose to start leasing that instead at the end of the month. They will not have to try and sell an outdated product or service. The first thing a small business must do before leasing equipment is to decide what equipment they need the most and must purchase. This includes water, electricity, employees, and insurance. Once that is determined, most other equipment can be leased. The equipment that is leased the most includes computers, printers, and copiers. However, it can also include equipment such as employee uniforms, cash registers, or appliances (kitchen or outdoor). These types of equipment change and improve frequently, and soon enough, anything like this purchased for the business will be outdated or not able to run properly and in need of a replacement. That is why equipment leasing will come in handy, for the business will be able to keep up with these changes and improvements mush easier. The next thing a small business must do before leasing equipment is to determine just how long they intend to lease. The time frame will be likely to vary depending on the product or piece of equipment. For example, stoves or dishwashers will last at least five Figure 4: This pie chart outlines how popular equipment leasing is and business owners’ willingness to do it again. (leasingservices.biz)
  • 7. to ten years before they must be replaced. However, furniture, such as tables, chairs, or desks, will last much longer than that, even over 20 years. If a certain type of equipment will be leased for several years, it might just be better to purchase it. With each year that passes, the business owner or manager must remember that they need to renew their lease, surrender the equipment, or finally just purchase it. The most important aspect to remember about equipment leasing is whether the equipment is essential to the business or just a desire. It is also important to remember how long equipment lasts before they break down or become outdated. The equipment that goes out of date the fastest, such as technology (computers, printers, and copiers), transportation, or kitchen appliances, should be the first priority for a lease. Other items, such as tables, chairs, or desks, should be the last priority and could be purchased instead. Equipment leasing versus actually purchasing equipment is usually less expensive, and regardless of the piece of equipment, it is the better route to go for a new small business. Chapter Five: Commercial Real Estate-An In-Depth Approach Although some small businesses today, including Tourbillon Alliance Partners, conduct all their business online, most small businesses will want at least one physical building to conduct business. Just like with equipment, most businesses will want to lease a building instead of build or purchase their own. The process of leasing a building seems simple enough, but there are actually many meticulous steps and months that go into the entire process. From meeting with realtors to attending showings, the commercial real estate process can be exhausting and time consuming, not to mention competitive. However, it is essential to stay on board no matter how long it takes, because it will give the best possible results to the small business. First, the small business owner must do research to determine what buildings are up for lease and where. Once they find buildings that are for lease, it is important to also research prices of each building. Even if the price is lower, it is also important to determine what condition the building and how much renovation would cost. Another building may be a more expensive lease, but it may also be in better condition and in little need of renovation. Therefore, in the end, the total cost could possibly be lower than the building with the cheaper lease.
  • 8. It may also be the case, especially in older and/or smaller towns, that every building available for lease is in need of major renovations. Just like with equipment leasing, this owner or manager then must determine how much renovation is needed per building and what is and is not necessary. In addition, the cost of total renovations per building and the time it would take per building to complete those renovations before they can open to the public should be considered. This alone will be a major factor in which building the small business decides to choose and operate their business. It is not often in the owner or manager’s control in what condition the buildings are in. Once the buildings and prices are researched, it is essential to work with a realtor. They will have the final say on how much renovation needs to be done to each building and what the total costs will be. They will also provide tips and advice on the area and what kind of business to expect from the local community. In addition, the realtor will also schedule showings so small business owners or managers can see how much space they are working with and whether the area is easily acceptable for all their business’s needs. Realtors will also help the business owner or manager determine a budget and make an appropriate offer once they have found the right building for their area. Other businesses may have better offers, which is why real estate gets so competitive. That is why there should be plenty of options to choose from, in a few different communities. When a building has been selected, it is important to remember how much renovation will need to be done and when the owner or manager and their employees are able to start moving equipment in and turning the building into their own. Once that is determined, then they can start to work with opening dates when their products and services will be available to the public. The Figure 5: This graph shows the success of commercial real estate during last year’s second quarter. (nspireassets.com)
  • 9. whole process may take up to several months, which is why presales and setting up booths at local events may be beneficial to the business. It is always good to start making money even before the business officially opens. Chapter Six: Several Years into the Future Working Capital, Equipment Leasing, and Commercial Real Estate are three major and essential focus areas if a small business owner wishes for success well into the future. While they are three distinctly different areas, they go hand-in-hand in order to provide the best possible results for any small business. Incoming profit will always vary depending on where the business is located, whether they are seasonal or run year-round, and how they obtain and utilize their necessary equipment. Even if the small business is in a quiet location and only open during two seasons out of the year, how they approach these three areas can yield success. However, this success cannot occur unless the small business owner or manager steps up and takes action. Gaining support from friends and family puts them in a great position to start a great business. If they promote the business well, their family and friends will be more willing to contribute to it until funding is available. Presales or samples of the products and services can also help the business get a jumpstart, since the general public will be more aware of what they can take away from the business. The owner or manager should then apply for funding when they find what works best for the business. From there, they can take action to find a location and necessary equipment. Years down the road, once the small business has taken off and made a name for themselves, the owner or manager may want to consider even bigger ways to bring in more profit. One way is to expand. This can mean adding on to or renovating the current building to add more variety to the products and services, or it can even mean adding more locations to cater to consumers in several different communities. This, however, cannot be possible unless the small business is thriving and bringing in a comfortable amount of profit. That is why it is a goal to work towards. It may take up to several years, but as long as the original location brings in regular consumers, it is worth the wait and possible to achieve. Another way to keep consumers interested in the small business is to update products and services to keep up with new innovations of the year. For example, if a business sells cosmetics, they can update their products so that they last longer and highlight certain features on a person’s face. A great example of a business that must always keep up with new innovations is a business that sells different types of technology. If a business sells DVD players, they can add extra features to them, sell players that hold multiple disks, or sell players with a clearer and more vibrant picture. Updating these products or adding extra features to them may be a hefty expense and may take a long time to develop, but once they are released, they will keep consumers and profit coming in.
  • 10. With a small business, especially one that is slow to develop, it is oftentimes difficult to support a large number of employees. There is only so much money available, but more money in the future means a higher possibility of hiring. More employees mean more productivity and more flexible work hours. Employees of a small business are especially satisfied when they have a flexible work schedule, and they will be more likely to recommend the job to any friends looking to work part-time. As long as there are adolescents and young adults actively searching for work and ready to provide friendly, efficient service, the small business will be able to provide their products or services for many years. Several different factors go into small business funding in order to make it effective. At times, especially at first, it can prove to be overwhelming and challenging. Banks will always have the ability to turn down a new small business looking for funding. However, if the small business has perseverance, applies to multiple banks or starts with the help of family and friends, and offers presales or discounts, then they will be more likely to find success. There are many areas of focus for small business funding, though the three main ones include working capital, equipment leasing, and commercial real estate. If the small business owner or manager is only able to focus on these three areas, then they are well on their way to success. Figure 6: One way to pay for the borrowed money is through increased business. New technologies,such as these Smart Phones,can help boost sales for a small business. (1stwebdesigner.com) (informationtechnologydivision.com)
  • 11. Works Cited Aaron, Jesse. “Vital Small Business Statistics, Trends and Facts for 2014.” GetBusy Media, Entrepreneurship: 13 February 2014. Web. 30 July 2014. “Applying for a Loan.” Small Business Funding (smallbusinessfunding.com), Application Process: 2014. Web. 1 August 2014. Mullins, Dave. “Tourbillon Small Business Funding Tips,” Tourbillon Alliance Partners (tourbillonalliance.com), Products and Services, 2013. Web. 3 June 2014. “Multi-Family Acquisition and Asset Management.” NSpire Assets (nspireassets.com), Commercial Real-Estate, 2013. Web. 15 August 2014. “SCM Strategy: Don’t Press Wrong Buttons to Reduce Cash to Cash Cycle.” infoverto.com, Finance: 2009. Web. 21 August 2014. “Web Design.” 1stwebdesigner.com, Technology: 2008. Web. 21 August 2014. “What are the Types of Leases and how do They Work?” LeaseAdvisor (leasingservices.biz), Equipment Leasing: 23 May 1999. Web. 21 August 2014. Working Capital Components.” Small Business Development Corporation- Government of Western Australia (smallbusiness.wa.gov.au), Working Capital: 2014; Western Australia. Web. 15 August 2014.