WS Chronicle

By Algenon Cash

Small businesses are the backbone of this great nation – they are responsible for 70 percent of the new jobs created in the country. 

It’s a common misnomer that you must develop the latest and greatest technology to be considered an entrepreneur.  Risk takers who launch restaurants, barber shops, clothing stores, beauty salons and coffee shops have an entrepreneurial spirit just as much as the next person.

Without small business owners, many people would be unemployed, teens may not receive entry level job experience and communities at large suffer from lack of investment.  The “mom and pop” businesses peppered throughout the community are deeply important to economic development and they contribute to the quality of life.

Not to mention, small business owners are often the only people willing to pioneer into challenged neighborhoods, develop innovative processes or play a central role in the transformation of a community.

Capital is the lifeblood of any company, whether you’re still operating in your garage or expanding an already successful enterprise – you will find it next to impossible to reach your goals without an adequate supply of capital to fund your operation.

Fifty percent of all businesses often fail during the initial five years, with 50 percent of the remaining businesses failing during the subsequent five years.  So that simply means that out of 10 companies started every year, only 2.5 may still be in business after 10 years – not the greatest odds. 

The Number One reason most of these start-up companies fail is because they run out of capital for operations, new product development, marketing or expansion plans to scale the business.

Successfully raising capital for your growing business is harder now than it has been for a long time, but these strategic tips may boost your odds:

Demonstrate a strong track record.

Companies that can document strong historical financial performance will be able to get a foot in the door with banks and potential investors.  Start-up entrepreneurs will need healthy industry experience and a robust network.

Be specific about your capital needs.

If you meet with a banker or investor and ask for whatever the bank will lend you or the investor may invest in your company, both will know you have not put much thought into your business plan and capital request.  Remember to set S.M.A.R.T. goals – make sure objectives are smart, attainable, reasonable and time-driven.

Leverage your relationships.

You will not always get the best deal from your existing bank or investor relationships, but if they know and like you, it may help your chances significantly.

Know it all.

Be prepared to answer any question about your business or investment opportunity, have lots of supporting documentation and be upfront about your strengths, weaknesses, opportunities and threats.

Be persistent.

If one capital source won’t lend or invest in your company, the next one might.

Algenon Cash is the managing director of Wharton Gladden & Company, an investment banking firm. Reach him at acash@whartongladden.com