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New Approach for Loan Requests
It's Maddening, But...
In today's financial climate, how in the world can independent retailers (that's the 92% that are not publicly traded) get financing? In most cases banks are not lending (even as they run huge ads proclaiming their "support for small businesses".) Landlords aren't more lenient, nor are many vendors. Even mothers-in-law are asking tougher questions!
So, what should a retail owner do? Just give up on the idea of getting financing?
Well, it is maddening, but The ROI recommends an easy exercise that may be of great help.
Remember, especially today, there is essentially no such thing as a bank loan to a privately-owned retail business as an entity of its own. That is, a bank loan without the personal guarantees of the owner(s) is not available. It just is not happening. And further, the personal financial statement and guarantee of the owner(s) must be supplied along with all the standard information - and financial statements - for the business.
So, here is our suggestion: as you prepare your loan application (or are "reporting" to your current lender),
- combine the Balance Sheets for the business and the owner(s);
- calculate the key ratios for the combined Balance Sheets.
That's right. Do the banker's work for them!
Here's why. The business, on its own, might have a 2.1 Debt-to-Worth ratio, and a 1.75 Current Ratio. But when rolled together with the owner's Balance Sheet, the Debt-to-Worth ratio could drop to 0.8, and the Current Ratio rises to 3.2. A totally improved picture!
This is an easy way for you to analyze for yourself the financial implications of the loan you are requesting, and to "do justice" to the financial strength of your loan request.
Remember, banks put the Balance Sheets together anyway. We're just suggesting that you do it for them. After all, they are probably much too busy to see the big picture by themselves!
For more ideas, go to The ROI: Win Over Your Bank.
Don't Worry. It's Only the Future
There are three kinds of retail owners:
- those who make things happen
- those who watch things happen
- and those who say, "Uh...what happened?!?"
As you start to catch your breath a bit from the crisis atmosphere of the last 18 months, don't relax too much. Now is the time to be pro-active about your future!
We are now more than halfway through 2010. This is the time to start your planning for 2011. And The Retail Owners Institute has just the tool you need. We call it "The Nine Stepper". (Is that a technical term?) You can read about it here.
Like many of the other resources at The ROI, the Nine Stepper takes a sophisticated approach and boils it down to a workable, useful tool for busy retail owners.
What will you need? Last year's numbers (from your financial statement); YTD results for this year (so you can guess-timate how the year will end up); your plans/forecasts/expectations for next year, 2011.
Then, download the Nine Stepper pdf file from The ROI, make several photocopies, and sharpen your pencil!
The Nine Stepper can help you do your planning just like the pro's do.
Retail Business Insight from The ROI
Telling Signs to Monitor
Every retailer keeps track of sales - daily, weekly, and monthly. But the pros also track transactions the same way.
Therefore, when sales go up or down, the pros know why. Change in the number of transactions? Or change in the size of each transaction? Then the next steps become more obvious.
Re-Inventing Retail - The ROI's Blog
Join the conversation! Check out The ROI's Blog. It's called Re-Inventing Retail. You will find some provocative ideas there (alas, no magic solutions!)
See what we said about retailers getting SBA loans from Sam's Club. Do you agree?
What? You're Not an ROI Member?
Joining The ROI could be the best - and least expensive! - insurance policy you ever took out. Just $24.95 per month gives you unlimited access to the entire ROI site - including all parts of the Members-Only Collection. Available nowhere else. Find out more. Take The ROI's online Site Tour. Remember, 2/3rds of the content at The ROI is available to Members Only. Specialized Retail Business Calculators. Online, self-paced Financial Basics Seminar. ROI Guides. Glossary of Retail Financial Terms. Podcasts. And much more. Start now!
Is Your Organization Dependent on Independent Retailers?
Do your retailers look to you for help with their business management?
Finding it harder and harder to provide them the help they need to survive?
It's time to team up with The ROI to train your retailers on "the business of retail".
Outsource the training and support on financial fundamentals to The ROI experts. Focus your internal resources on your industry-specific issues. (Now that's good resource management!) Best of all, have an immediate impact with your retailers, just when they need it the most. Find out more.
About The Retail Owners Institute®
The ROI is a round-the-clock business training resource for independent retailers. The Retail Owners Institute – www.RetailOwner.com - offers extensive, practical self-help, training, and resources for controlling inventory, cash flow, margins, markdowns, turnover, and more. Plus much more for ROI members. Visit The ROI today. By retailers, for retailers. Available nowhere else.
Need to contact The ROI? Call us toll-free at 1-800-499-7531
Or, use the Contact Us link on The ROI site to email us
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