Do Your Numbers Make You Fundable?

Small businesses need funding to grow, and while the growth opportunities are so crystal clear for the entrepreneur, they look foggy to the lenders that can help them take on those opportunities. Small businesses have difficulty accessing funding because their numbers don’t tell a good story or no story at all. That is the story that is told by the financial statements, bank statements, credit history, tax returns, and other corporate and personal documentation (or lack thereof).


This is important during good times, but even more important during crises times like the pandemic or a natural disaster hits your business and the economy, because accessing these funds can be the difference between a business that survives or perishes.


The lack of proper documentation to access capital became strikingly evident as the small minority businesses that most needed relief funding because of the pandemic, were the very businesses that had the most difficulty accessing federal programs like the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans, or local funding programs because they just didn’t have the records that proved they qualified for those programs. In fact, it is estimated that approximately 24,750 of small businesses in Miami-Dade County are owned by African Americans (South Florida Business Journal, Miami-Dade County to Receive Funds for Minority-Owned Businesses, June 16th, 2020). Many of these businesses, and others owned by Hispanics or women, had not received any assistance from government programs during COVID-19. Data released by SBA for PPP loans under $150,000 identify only 83 businesses as owned by African Americans and 2,219 as Hispanics. These businesses received .18% and .13% respectively of the $1.8 billion in loans approved to all businesses under $150,000 in Congressional Districts 24, 25, 26, 27) (SBA data).


So how can you as an entrepreneur obtain the funding you need when your numbers don’t tell a good story? You are too busy running your business, making things happen, and you don’t have time or don’t know how to get your financials in place, you need help to get everything done, but you are not confident your business cash flow will allow you to hire help, and applying for loans takes a lot of time and effort, all of which hinders your ability to say yes! to that contract or business opportunity you can clearly see in front of you.



The reality is that the numbers and records need to tell a good story for you and your business to be deserving of funding, or fundable. So here are some key steps to write a good story in numbers that show you are a sound business owner and elevate your business status:


  1. Separate personal and business finances. Few things inspire more confidence to a lender than a business owner that understands where the business ends and personal finances start (and vice versa), because it talks about their organization, planning skills, and their mindset. Commit today to pay only business expenses out of your business bank account, and pay yourself (either under payroll or with a check to yourself if you distribute profits), so your personal expenses don’t show up in your business account. To your potential lender, it doesn’t look good to see your gym membership or your visit to cigar stores in your business bank statements.

  2. Open a business bank account, if you haven’t already, and use it just for business transactions (see numeral 1).

  3. Keep your books in order. This is essential because it captures the numbers and organizes them in financial reports that succinctly tell your business story to the lenders, and especially to you as the business owner. You can easily keep track of your income and expenses today with subscription-based or free software applications that link to your business bank account, which will do the heavy lifting of the bookkeeping as long as you have your books set up, or you can work with an accountant that keeps the books for your business and helps you analyze the financial reports every month.

  4. Submit your tax returns. This is where many business owners cause trouble to themselves, by loading up on business expense deductions that minimize profits or create losses to pay less to Uncle Sam. While it might be tempting, keep in mind that what you declare in your taxes is what lenders go by to determine if your business is profitable, and by how much. By showing losses or little profit, you are limiting your funding opportunities in the eyes of the lenders. This is precisely why many sole proprietors didn’t qualify for the PPP, as they didn’t technically have the income to be replaced by the program because all they had to show for were losses in their tax returns.

  5. Build cash reserves or a downpayment. Cash reserves are the liquid funds that your company keeps aside to meet short-term or emergency needs, in case the inflow of cash stops for unexpected reasons (natural disaster, the client takes longer to pay, legal closures of business, or a health crisis like Covid19). A downpayment is the money saved by the business that is earmarked for specific investment uses, and it is used as a downpayment attached to a loan application. Showing that you have the discipline to save money for emergencies or to put down for an investment gives lenders greater confidence that your business has a safety net to fall to in case of emergencies, and that you are committed and have skin in the game you are requesting the loan for.

  6. Manage your credit. This goes for both, your personal and your business credit. Get a good understanding of what affects your credit and how you can build it up to give you better chances for funding and at lower rates.

  7. Corporate documentation. Make sure all your paperwork is in order. This includes your business incorporation, taxes set up, required business licenses, insurances, proper payroll, and 1099 payment documentation. These show you have a formal operation, portray you as a solid business owner that knows how to do business and is protected from liabilities that also limit the risk of your lenders.

If this all looks daunting to you, the good news is that you don’t have to do it alone. Thankfully there are organizations and professionals that can help you tackle these aspects for no little or no money. For example, there are non-for-profit organizations like CFNMD and its working partners that provide free credit counseling, free business guidance in setting up your books or getting the appropriate corporate documents that your business needs (among many other areas). For more established businesses, there are accounting consultants that for a fee can be part of your management team, offering you their guidance and expertise in making the financial decisions and planning the next steps to help your business reach its growth goal.


So while small businesses have difficulty accessing funding because their numbers don’t tell a good story, or no story at all, you now know that you can change that with some careful planning, an open mind and a focused execution. Not only will you be more confident knowing you can take on the growth opportunities you clearly see on the horizon, but you’ll be able to easily show lenders you are fundable. You’ll be a better entrepreneur, as you will know your business better, will have better information to make decisions, and will surround yourself with a qualified group of advisors.

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