3 Mission-Critical Questions to Ask When Searching for Business Financing

4 min read • Jun 21, 2011 • Joe Abraham
dna uop

Today’s guest blog is by the author of “Entrepreneurial DNA.” We’re honored to have Joe offer his expertise.

“If I just had more capital …”

That is the #1 statement I hear from entrepreneurs around the country.

Assuming you are in that boat right now — and looking to engage Lendio to help you find the right business financing — here are three important questions I want you to consider at the outset:

1. Have I built the most optimum Use of Proceeds (UOP)?

Many lenders are going to ask you to provide a Use of Proceeds (UOP) — a document that breaks down the places you will spend the money they are about to lend you. Building your UOP can take 5 minutes or 5 days — depending on how seriously you take the process. Most business owners assume the UOP as just another “checklist item” to submit in a loan package, and rush through the process. In doing so, they miss a real strategic opportunity.

I can assure you that if your UOP is designed to pay off past due payables, make payroll and pay operating costs, lenders are less likely to get excited about partnering with you. After all, they don’t want you to throw their money at old business that cannot generate new cash. They want the capital to go toward growth initiatives that can make you a great ROI while ensuring they (the lender) get paid back.

So take a look at your UOP. Ask yourself if you are planning to invest the money in old or new initiatives. If most of your UOP today is focused on old stuff or maintaining current infrastructure, consider going back to the drawing board. Build a strategic plan focused on growth and ask lenders to fund that initiative. Then take the ROI from that initiative to pay off old bills and cover payroll shortfalls.

2. Does my strategic plan have a contingency plan attached to it?

Take it from me, a guy who has sat at many a conference room table with business owners who borrowed money only to have it not last long enough. It’s called “running out of runway.”

More times than not, things won’t go according to plan. So you’ll be called on as the leader of the pack to pivot, make adjustments and engage contingency plans. Trying to come up with a contingency plan after stuff hits the fan is not the best time to do it. Rash decisions, myopic vision and desperate selections are all part-and-parcel of the “figure-it-out-as-we-go” method.

Your lender is trusting you to execute the plan you have put forth. But they are also expecting you to be poised and ready to react wisely when things go off plan. So take the time during the application process to build your game plan and also architect the plan B and plan C.

You’ll be glad you did.

3. Who’s on the bus?

One of the kisses of death (so to speak) I have seen over and over in financing situations is when a CEO raises capital for a growth initiative without taking a hard look at his or her human capital war chest.

Here’s the fact — money doesn’t solve everything.

Lendio can certainly connect you with the ideal lending partner. Things may even go incredibly well through the application and funding process. But if you don’t have the right team ready to execute the strategy you have built, it could be a very frustrating and costly journey for you.

So please take the time to ask yourself this very candid and tough question:

“Does my current team have the unquestioned ability to take this $____(fill in the blanks) and generate a minimum 5x return?”

If you find yourself jumping out of your chair saying “Yes! Absolutely.” Then move forward with confidence.

However, if you find that the team you have in place is part of the reason things aren’t going as well as you want in the business today, solve that challenge while going through the process with Lendio (and certainly have it done by the time you get funded).

You are making a huge commitment to your business by facilitating this financing round. Make sure you have an optimized UOP, a robust contingency plan and a rockstar team ready to ensure this cash turns into windfall profits.

Do those three things and with Lendio’s help, you’ll be well on your way to achieving your biggest dreams.

About Joe Abraham
Joe Abraham is founder/CEO of BOSI, a venture-backed business community and online concierge for entrepreneurs. He is also the author of “Entrepreneurial DNA: The Breakthrough Discovery That Aligns Your Business to Your Unique Strengths” (McGraw Hill) – available in bookstores and online. Prior to launching BOSI, Joe was involved in the startup and growth of over 30 companies in industries ranging from IT and Wellness to Consumer Goods and Motorsports. You can connect with Joe at http://www. joeabraham.com and on Twitter at @Joeabraham_bosi.

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Joe Abraham