Business
Lyceum
e-Letter
Practical Instruction in the Arts and Sciences of Making
Money
SEPTEMBER 2000
Greetings & Salutations:
Money! Money! Who's got the money?
Over the past month, I guess I have fielded a couple dozen questions about
"Financing" a small business ... everything from small manufacturers to
Internet marketing companies. -- So ...
This month, let's explore the issue of ...
Getting Financing for Your
Business
Having set on both sides of the desk ... both Borrower and Banker ... I
have seen the best and the worst of both worlds. -- I have known Bankers who
knew absolutely nothing about doing business required by their "job" to pass
judgment on business loan applications ... relying upon outdated textbook
business templates to make a decision.
On the other hand, I have seen otherwise intelligent business people ...
with sound business plans and sometimes even successfully operating small
businesses ... approach the lenders with the most ridiculous "financing plans"
imaginable.
In one case, a small business owner came to me for financing for his
business. -- He needed about $150,000 to expand the business from its current
operating base. But, instead of asking to borrow $150,000 ... which was
justifiable ... he wanted to borrow $1,000,000; putting $150,000 into the
business and using the $850,000 to create a self-liquidating sinking fund to
pay off the loan. (He told me, "That's the way the big companies do
it.")
Another "business borrower" came halfway around the world to my bank in the
South Pacific to try to borrow $25,000. -- The loan may (or may not) have been
justifiable but his business was too far away for us to get a real picture of
his "local trade area" business. -- When I directed him to take his request to
a bank or loan company in his home town, his reply was, "They all know
me." (I guess he figured I didn't know him, so I would give him the
money.)
Beyond that ... in case after case ... "business borrowers" approached my
bank without knowing for sure exactly how much money they needed, or what the
money would be used for. -- In most of those cases, the "cash" requirements of
the business could have been reduced to near nothing by utilizing leasing,
factoring and vendor financing. -- In those cases where I could work with
the borrower, I would take the time to show them how to use leasing to
satisfy their equipment needs; factoring to give them a faster cashflow; and
vendor financing to increase their inventory ... without borrowing any money
at all.
Unfortunately, in the majority of those cases, the "business
borrower" wouldn't listen to anything that didn't put the "cash" proceeds of a
loan into his grubby little paws. -- Their attitude was, "Just give me
the cash. Then, I'll use it to get what I need." -- But, as every banker
knows, "cash" only has value in a business when it is "necessary" to the
business ... not just a "wanna have."
So, if you are looking for "financing" for your business, you should
...
First Determine Exactly What You Need!
(Most Likely, You Don't "need" As Much As You Think.)
Back when I was serving with the "Active Corps of Executives" (ACE) program
with the "Small Business Administration" (SBA), I was called upon countless
times to review the loan applications of, and interview, small business people
seeking SBA loans.
My job was to find out whether or not the loan amount was sufficient to the
needs of the business; or excessive. -- To that end, I looked at each loan
application and asked myself a series of multi-part questions. Questions
you need to ask yourself, before you even begin your search of business
financing.
Question #1: Is any part of the loan to be used to buy
equipment of any kind? -- Can that equipment be leased, or will the business
need the cash to buy that equipment? -- If the business must buy the
equipment, is there a ready market for that used equipment should the business
fail?
Question #2: Is any part of the loan to be used to buy
inventory? -- Do the vendors in that particular business offer their goods on
consignment? Open account? Short term (90 day) financing? -- What
is the minimum cash required for starting inventory? -- What kind of cash
reserve should be set aside for future and on-going inventory? -- What is the
anticipated annual inventory turnover? -- What is the industry 'norm' for
inventory turnover?
Question #3: Does the business currently have any Accounts
Receivable? -- How much? -- What is their aging? (How long do they stay
unpaid?) -- Can the borrower Factor the current Accounts Receivable to
generate some of the cash requirements? -- Are the Accounts Receivable too old
to be Factored? (That probably means the business should be required to
review their credit policies.)
Applying just those three questions to your "business financing" needs will
put you ahead of the game. -- You will better know what you really need - and
- by noting the answers to those questions in your "Loan Proposal" or
"Business Plan," you will be able to show a banker where you have made an
effort to use alternative sources in your planning. -- But ...
What If ... even then ... The Bankers Won't Loan You
Any Money?
Well, don't feel like the Lone Stranger. -- Over the years, I have seen
even the best thought out and presented business loan applications rejected by
Bankers (and the SBA) simply because the lenders lack a working knowledge of
the business community they are serving.
In that case, you might want to use ...
The Greatest Financing Tactic Of
All!
Over the past 40 years, I have seen more money raised using this method
than any other. -- In one case, I saw it generate over $500,000 in "private"
financing in less than a week.
What is it? -- What is it?
Believe it or not, all you have to do is run a "Classified Ad" in the
newspaper ... preferably the newspaper in the largest city near to you.
But, it's not what you say in the ad, it is "WHERE" you place the ad.
What? -- Didn't I just tell you to place the ad in the "Classified" section
of the newspaper?
YES - but - you probably think the ad should be in the "Business
Opportunities" section. -- It shouldn't. -- In order to reach the people you
need to reach, you should have your ad published in the "PERSONALS" ... that's
where it will be seen by the Private Investors you will be seeking.
Now, here is the customary, and generally acceptable, ad to use:
PRIVATE INVESTORS Wanted for new ____________ enterprise.
Minimum investment $xxxx. ROI ____%. Business plan
available. Call:
Of course, the ROI (Return On Investment) you offer should be significantly
higher than the interest being paid by local banks. -- Today, 12% to 14% are
good numbers.
You should have a well thought-out Business Plan prepared to tell your
story to anyone who calls - but - don't mail it to them. When a
potential investor calls, set an appointment ... time and place ... where you
can meet with them. -- This will allow you to separate a lot of the "tire
kickers" from the "real players." -- Take a copy of your Business Plan with
you and be prepared to answer any questions.
Note: Have your attorney prepare the necessary
promissory notes and/or any other legal documents you might need. Take a
set of those forms with you, too.
In some cases, you may be able to convince the investor to write a check
right then - but - in most cases, you will have to leave a copy of the
Business Plan and any necessary forms for them to "think about." -- Follow up
with them. -- Respond to any further questions they may have. -- ASK them for
a loan ... or investment.
Should the investor decide "NOT" to participate, ASK them to return the
Business Plan and forms to you ... by mail, or in person.
A lot of work - but - when you really need the financing, it is a small
price to pay.
Then again, you could ...
Take Your Business Public!
Hey ... that sounds a lot harder than it actually is, today.
Using "Form U-7" under the "Small Corporate Offering Registration" (SCOR)
... adopted by the North American Securities Administrators Association in
April, 1989 ... your business can...
Raise up to $1 million annual ... Sell stock to an unlimited number of
non accredited investors ... Use ads and telemarketing as general
solicitations ... and ... Allow registered brokers and officers to sell
the offering.
When you use the SCOR Form U-7, you don't have to go through the regular
registration process, or even file any documents with the Securities Exchange
Commission.
Beyond that, it is even easier when you need less than $500,000 because,
under $500,000 you don't (usually) have to have audited Financial
Statements.
Rather than try to explain the SCOR program to you, I high recommend you
cough-up a paltry $14.95 and buy a copy of "How To Raise $1 Million
for Your Business" ... the most revolutionary manual ever written on
the how, why, what, where, when of selling up to $1 Million worth of your
stock to the public ... a step by step manual with sample replies ...
including all important "contacts" who can assist you in getting the job done
the right way.
With the information and resources in, "How To Raise $1 Million for Your
Business" you could be selling free trading stock in your company ... with
no restriction for resale ... quickly and hassle free in as little as 30
days.
Order your personal copy of "How To Raise $1 Million for Your Business"
directly from the publisher at: http://www.salesmart.com/scor.htm
Once you have your SCOR offering prepared, start selling the issue to your
family, friends, associates, and co-workers. Also, place your classified
ad in the newspaper again only, this time eliminate the ROI and change
"Business plan available" to "Prospectus Available."
This might just catch the eye of a Big Bucks Venture Capitalist, or some
stock brokers, who will be impressed with the fact that you already have a
prospectus.
By the way, with a SCOR offering, any Stock Broker can sell the stock for
you ... in any state in
which you file the registration. (I suggest
only registering in your own state to begin with. If a stock broker
wants to sell the stock in another state, let him register the offering in
that state for you.)
Of course, there are other ways to get financing for your business - but -
these are the best ways I know of and I know they work because I've either
done it myself or helped others do it. -- But, no matter how you go about it,
always remember ...
STRAW'S LAW OF BUSINESS FINANCE
Business financing is an expedient; not salvation. It is ONLY a way of
spending tomorrow's earnings, today. If the project AND borrower, combined,
cannot logically indicate future earnings; the lenders won't touch it with a
10-foot pole.
Note: Now that you've read this letter, go to:
http://www.businesslyceum.com/finance.html
and read my article entitled, "Business Financing - To Be or Not To
Be." (I think you'll learn something.)
Of all of the legendary characters in the mailorder industry, one of the
greatest of all times is my ol'friend E. Joseph Cossman. -- For over 30
years, he has been hailed by the news media as "The Millionaire Maker"
... the man who has taught otherwise ordinary people to (literally) make
millions; with testimonial after testimonial attesting to the fact. --
Now, Joe's teachings have been brought into the electronic age by his son;
Howard Cossman. -- Over a 25 years period, Joe Cossman marketed over
20 million products ... from toys to household items; from sporting goods
to insecticides ... with no more than a handful of employees at any given
time. Now, Howard Cossman has assembled all of Joe Cossman's proven
marketing methods on a remarkable new CD-ROM called "Marketing Synergy"
... with the Cossman International Marketing Database fully integrated
into the program so all you have to do is "click" on the links to go
directly to the web addresses ... or "click" on the internal links to navigate
within the "Marketing Synergy" program itself. -- With the
"Marketing Synergy" CD-ROM in your CD drive ... Pentium PC, or
Power Mac ... you can market any product ... nationally or internationally ...
as many ways as possible; to as many markets as possible, right there from
your computer. -- I tried it on my computer. Now, when I need a new
marketing idea ... with all the sources & resources at my fingertips on my
computer screen ... I just plug in the "Marketing Synergy" CD and let
my fingers do the running (I don't walk when I'm marketing something).
So ... if YOU are marketing anything YOU must have this CD. -- The regular
price is $149 - but - order your personal copy during the introductory period
and you can get it for only $99 -- easily worth 100 times the
price to anyone who sells anything. -- Order your personal copy of the
"Marketing Synergy" CD-ROM, today!! -- Or, at least go out to the
Cossman Website and see the 11 Steps Cossman used to sell over 20,000,000
products. -- Contact: HOWARD COSSMAN, Cossman International
Marketing, P.O. Box 4112, Thousand Oaks, CA 91360 -- (818) 879-0330 --
FAX: (818) 879-9326
mailto:hcossman@earthlink.net
-- http://www.cossman.net/
Now, let's get to some ...
Comments & Questions
Jana Trimble (info@net30solutions.com) wrote:
"We are an outsource company providing business services such as a free
NSF recovery program, merchant accounts, automatic debiting of client
accounts, and other stuff. I'd like to tell your readers about
our FREE Bounced Check Recovery - it's truly a no-brainer for the biz
owner."
Okay, Jana, let's tell 'em ...
Business Owners - Collect Bounced Checks for
Free!
Why spend your time trying to collect returned checks - let Net30Solutions
do it for you! There are no fees, no limit on number of checks,
and no long-term contracts to sign. Our electronic process is
faster and more convenient than any other method available. It
works on any bank in the U.S. and its territories. When the funds
are settled, you receive 100% face value of the check. You are
paid weekly on collected and released funds - no more waiting for your
money! -- A great deal for merchants who have NSF problems because it
costs them nothing. In some states, they even get a rebate to help
pay for their bank charges. Let Net30Solutions provide the answer to
your billing problems and increase your cash flow! Visit them at http://www.net30solutions.com/
Alvin Corbett (alvincorbett@hotmail.com) asked:
"Once again I am at the feet of the master with a question. I will
have by tomorrow morning a Sight L/C opened in my favor by tomorrow
morning. For a order that must positively absolutely get there before
the end of the month now to help expedite matters I requested a 20% deposit
but if that is not forthcoming. Is there any way I can use this L/C as
meanings to finagle a loan to (1) give my supplier what he needs to begin
the order so it is shipped on time. (2) give myself some working
capital till I can finish the deal."
Alvin:
When you get the Letter of Credit, take it to a bank in your area that has
an International Department ... hopefully your own bank, where they know
you.
If the Letter of Credit is good ... the banker will confirm it for you ...
your banker will be able to write a back-to-back letter of credit to your
supplier to get the supplier moving on the shipment - and - depending upon
your profit margin, even be able to let you drawdown against the balance of
the Letter of Credit.
Using this method, your personal, or business, credit doesn't come into the
question. It is the "credit" of the Letter of Credit issuer ...
confirmed bank to bank ... that makes the deal doable.
The only problem you might have is if you try to work with a bank that has
NO knowledge of Letters of Credit. So, be sure to go to a bank with the
right expertise.
Then, Alvin Corbett (alvincorbett@hotmail.com) asked another one:
"Here's a question ... you have a website? You have a good
product? You have a merchant account to accept credit cards. So,
how do you turn this into a profit machine and get those first
orders?"
Alvin:
Believe me ... it ain't as easy as the Internet Marketing Gurus say it
is.
First ... instead of doing all the silly postings to Free Classifieds,
Newsgroups, & FFA pages ... try to define your target audience. -- That
means knowing; or at least taking an educated guess at, the kind of people who
might want to buy your products.
Once you have a pretty good idea "who" you are looking-for, search the web
for sites that cater to people who are interested in your kind of products or
services. -- Start with something like "Ask Jeeves" that allows you to frame
your search in the form of a question. The answers you get will give you
clues to other "specific" words & phrases to search.
Now, "visit" those sites and see if they offer e-zines. -- Sign up for the
e-zines. Read them. Visit the sites recommended in the e-zines. --
Go to the Discussion Forums & Boards ... ask questions, answer questions,
make yourself (and your web site) known. -- Always be on the look out for ways
to bring your site to the attention of the kind of people you have identified
as your potential customers.
Use every chance you get to get your site mentioned. -- Be out-front ...
identify yourself ... tell people what you have. And ...
If you can, prepare a solid mailorder campaign selling your product.
Then, in each of your mailorder sales pieces, tell your audience that they can
buy your products at your web site. (That's the way I started.)
Hey, as I said, it ain't easy. -- You just gotta get exposure ... make
yourself known ... then, invite
ever'body to your house (web site) to see
the products you offer.
Hope that helps ...
Crystal (ezbytes@ezbytes.net) asked:
"What Are The Pitfalls Of Internet Marketing? If research shows
that 90% of all advertising doesn't get noticed, what is the chance of
grabbing all those heavy hits at your website? What can you do to
increase the probability that your message will reach the prospects level of
desire and motivate him to buy what you are selling? If your prospect
is a skeptic, how can you overcome his doubts? If your prospect is
indecisive, how can you instill confidence in your proposal?
"As the internet speed traps offer more and more traffic to run you down,
what is the needed detour that would offer a direct path to your website
door of opportunity? Offline advertising in newspapers, trade
papers etc.? Direct response mailouts? These seem to be in order
for to serve the purpose of gaining additional buyers and not just
window shoppers. What then can help the online business to be more
productive and profitable than a good direct mail piece offering discounts
and specials not available elsewhere? Give me a reason to visit your
online business and more than likely I'll do some shopping there. At
the moment I'm in need of a few ink cartridges, paper and pens, a few glue
sticks, just the basics but what do I hear from Officemax or Staples?
Absolutely nothing. Can't even get a catalog sent to my door.
What does this say but that they don't need my few bucks thrown their
way. Ya know, that could amount to some big time dollar loss if a few
thousand people just like me are considered. Which could also explain why
WallyWorld continues to grow."
Crystal:
It is a puzzlement. -- Unfortunately, most of the people on-line are
"amateurs." They don't take care of their customers. Most of them
don't even identify themselves so you can know who to cuss when they foul
up.
As for some of the "biggies" ... like Officemax & Staples ... their
sites are manned by techno-brats who know everything there is to know about
"electronic stuff" but know absolutely nothing about business. In all
too many cases, it seems that management has simply died and left the
e-commerce side of their business in the hands of the technicians.
Myself ... the only reason my site has been successful is because I am a
known personality in the mailorder and information marketing fields ... read
my bio at the "about us" page on my site. -- It has taken me a lot of years to
establish my credentials.
The only way I've been able to instill confidence in my customers is by
simply being available to them ... I put my full name & address on every
one of my pages; along with my telephone & FAX numbers. -- Those who are
truly serious about my products but are somewhat skeptical can write, call or
FAX me. They know I'm where I say I am because I respond.
Keep the faith ...
P.S. -- Maybe you would have a better chance getting a catalog if you
included a "full" name in your request. -- Believe it or don't, most business
people are highly skeptical of people who don't use their full name in the
correspondence. -- Just "Crystal" is fine for friends & family - but -
your business communications should contain a full name.
Favorite Places!
In response to my request that you tell me about your Favorite Places on
the Internet ...
Kevin Falkner (kbf@lisco.net) wrote:
"I am partial to this site as it is mine, but I have had a lot of people
say that the reason they like it is because I do NOT use all the moving,
blinking, flashing, crap. It is simple and easy to navigate." http://www.batterystation.com/index.htm
Kevin ... I agree ... and it provides something everybody needs;
"batteries." A requisite in our portable electronic world.
Wayne Ford (Wayne.Ford@indsys.ge.com) wrote:
"Absolutely the most useful website I have found is CEO Express.
Hundreds of the best links categorized for easy search and constantly tested
and revised! Wouldn't 'leave home without it!'" http://www.ceoexpress.com/personal.asp
Wayne ... it made a great addition to my on-line tool kit. Ever'body
should have it.
Scott Cusker (cusker@uswest.net) wrote:
"If a person wants
to learn about marketing on the net, he only needs to go to one site.
Here you'll find 'Make Your Site Sell,' 'Make Your Knowledge Sell,' 'Make
Your Price Sell,' and 'Make Your Words Sell.' -- I'm sure you'll find Ken
Evoy, MD, founder of the site, as fascinating as I have." http://www.sitesell.com/salutary.html
Scott ... I've been reading Ken Evoy's stuff for some time. It is
good - but - I must caution you; as I have cautioned everyone for years. --
ALL of us ol'pros in Mailorder Marketing; and, now, ALL of the new pros
in Internet Marketing, are RIGHT -- but -- ALL of us are WRONG,
too!
In the "Marketing Game" ... whether you play it on the Internet, by
Mailorder, or by opening a Store ... there is NO right way; or wrong way, to
do it. -- There are just "ways" to do it. -- Those "ways" only become "right"
or "wrong" for your business AFTER you have tested, Tested, TESTED, and
Tested-Some-More ... discarding what doesn't work and re-duplicating what does
work in YOUR 'specific' business endeavors.
Well ... that's it for this month. -- In order to make every issue
responsive to YOUR needs, please send me your questions; or tell me what
sources or resources you need to build your business; or give me any thoughts
you want to share with your fellow members.
Believe it or don't ... I ain't a mind-reader. -- If'n you doesn't tell me
what you need, I may never touch upon the information, sources or resources
you need.
This is your publication for you to use to your benefit ... I am just your
moderator.
Until next month, keep well ...
J.F. (Jim) STRAW
Chief Cook & Bottle Washer
Thought For The Month!
"Words are sacred. They deserve respect. If you get the right
ones, in the right order, you can nudge the world a little." -- Tom
Stoppard
Can you stump the old master? -- Betcha can't!
Over the past 40 years (man and boy), I have made bundles of money in
direct selling, service contracting, wholesale merchandising, entertainment (I
was a professional Trumpet player, vocalist & Radio Announcer), freight
forwarding, import/export, retail merchandising, warehousing, real estate,
electronics manufacturing, finder's fees, closeout merchandising, financial
brokerage, business consulting, steel fabrication, gold and coal mining,
offshore banking, mailorder, writing, and publishing. -- That being the case
...
No matter what business you're in ... whether you're just starting, well on
your way, or at the top of the heap ... I've probably been where you are, done
what you are doing. -- So ...
Anytime you have a question about 'how' to do something in your
business - or - if you have any comments about anything I've said in
issues of this e-Letter; or if you want to add your 2 cents worth ... just
"ask" me or "tell" me.
Send your Questions, Comments or 2 Cents Worth to ...
eletter@businesslyceum.com
with "Question" - "Comment" - or, "2 Cents Worth" in the
SUBJECT.
If I, personally, don't have an answer to any question you may ask, I will
contact some of the professionals in your field of endeavor (I will probably
know one or more personally) to get the real 'skinny' for you.
Making Money is FUN & EASY when you know how! Learning "how" is Fun & Easy too -- when you use the
... FREE Reports ... FREE Resources ... FREE Newsletter ... available from the "Business Lyceum."
Jim Straw's Business Lyceum