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What can I do to help make my new business financially stable?

Think of capitalizing your business as digging a well. The wise business owner won't dig a well that only satisfies short-term needs, but will dig the well as deep as possible or at least lays that groundwork for doing so. At a high-level, there are at least five layers of your businesses financial well.

It starts with the personal assets of the principals. This is the most commonly used, but not necessarily the best source of all the business's needs. The use of leverage in using other people's money (OPM) is typically the best approach for funding most of the business's needs.

The second layer is the 3Fs: Friends, Family and Fools, another commonly exploited source of funds.

The next three layers are: credit, loans and investors. While there should be some order to this, usually new business owners are all over the place when it comes to the deeper layers of the well, and they can find themselves getting lost in the process or they waste time going after funding that they are unprepared for. The biggest tragedy is when business owners wait until it is too late to look for capital. They usually end up out of luck. The reality is no one wants to give you money if they know you need it. Your best bet is to dig your well, when you don't need the water.

Written by:
David Gass, President & Founder
Business Credit Services, Inc.


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