This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Small Businesses Need Plan to Seek Financing

NEW YORK ( TheStreet) -- It's no secret that capital access for smaller companies has been difficult, at the very least, for the past few years.

But as the economy works its way forward, financing for small firms will also come back, and small businesses should be educated about the opportunities. From bank loans to peer lending, options for small businesses can be confusing and overwhelming.
Small businesses will have an easier time with lenders if they go in with reviewed financials and a plan for using loaned capital.

Ron Walker is co-founder and partner of Next Street, a Boston-based merchant bank and adviser serving small urban businesses typically 15 to 20 years old and with $5 million to $60 million in annual revenue.

Walker spoke with TheStreet last week about small-business owners choosing wisely and preparing to finance their business needs.

Where do investors and lenders typically prefer to see capital used?

Walker: They want to see the money being used to assist in executing whatever the model is for the business to generate the desired results, i.e. profitability. So if you're going for operating capital, they want to see a detailed analysis of what that capital is used for, whether it's for people, whether it's for building your operations, whether it's for executing on models, etc. ... They want to know and see pretty clearly what the capital will be used for, but ultimately today they want to see what the result is.

Secondly, if it's more senior capital/senior loan types of capital for purchasing equipment, they want to see what it's being used for, what's the value, what's the return, but most importantly they want to make sure it's being used correctly. What you see in some businesses that didn't ask for enough capital is that they start using the capital for the wrong reasons.

For example, if you had a line of credit and need to buy a piece of equipment, but you're maxed out on your term loan, some businesses may use that line to purchase that equipment, and that actually is a very bad flag on the business as they go for more capital moving forward.

How does a small business that's not used to dealing with banks and outside investors decide what type of financing is best for them?

Walker: I will always go back to the importance of doing a strategic plan. The real issue is growth capital -- what it's going to take to get that business where it needs to be in, say, the next three to five years.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.03 -0.71%
FB $105.41 -0.31%
GOOG $748.15 -0.02%
TSLA $229.64 5.22%
YHOO $33.16 0.61%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs