Funding Your Small Business Interview 2

I had the opportunity to interview Eric Tolbert Jackson, the owner of Business & Financial Consulting Group, who has over 20 years of commercial lending and investment banking experience. Eric shares his opinions in the interview below, reminding readers that his responses are from a general perspective and that each individual business would need to be evaluated and reviewed to advise on specific recommendations.

Here’s what he had to share:
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A. With a new business the owners need to invest as much of their own capital into the business as possible.  They may also need to consider taking out personal credit cards, loans and equity lines of credit to fund the business as well.

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Depending on the kind of business every business needs to have a business plan and consider a loan through SBA.

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Crowd Funding is possible but better served for non-profits or products or services that have a humanitarian benefit.

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Competitions are good especially since in order to compete the owners have to know and understand their business inside and out which is a plus.  This also comes in handy when seeking private equity which is another great approach to funding along with bringing in credit partners or other business partners that may have tangible assets or securities to leverage for capital through an asset based lender.  These techniques are good for start ups or existing businesses but existing businesses can get funding based on their current revenue, receivables and purchase orders.

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A. When financing a business, I believe the first choice to finance a business should be credit.  Debt financing is the cheapest form of credit.  Typically one can borrow money depending on credit between 5% and 15%.  This is an annual cost per year depending on the amount borrowed.  The alternative is equity financing which means the company has to give up ownership.  As an example, if a person gives up 5% of their equity and the company generates $1M a year that means the equity provider is receiving $50k per year.  However, if a person borrowed $200k with an interest rate of 10% the cost of funds would only be $20k per year.

A. Most businesses are ill prepared either from a credit, income or strategy perspective so the biggest challenge and mistake is not being prepared.  It is my advise that a business owner prepare, prepare, prepare.  Every business should benchmark their competitor or similar business that is successful and attempt to follow the same process to success.  In addition, a business should understand their market demographics know how they plan to penetrate the market and test the market to ensure there is a need for the product or service.

I want to thank Eric for a very informative interview. For more information on funding and Eric’s services, you can contact him at etjack05@aol.com or by phone at 770-377-5630.