Why You Should Always Be Challenging Your Financial Thinking

Generally speaking, every business has its unique financial core.

Over the years, more often than not, I've seen entrepreneurs spend the majority of the time working on the market share of their business.

That's understandable, given that without a market for the product or service, there's no business. It is also the visual output of time and energy -- the sizzle, so to speak, which will ultimately attract attention. So, it deserves attention. But just how much?

Admittedly, developing the product or service is the more fun part of the business equation, especially when everything comes into focus. That's the creative part of your company's core.

But spending all the time on the market side means the capital structure side (how you're financing your operations, your debt, exc.) is likely going to be given short shrift.

Sometimes, it's because there isn't enough time to research all the possibilities or in many cases, plenty of entrepreneurs who are either intimidated by finances or simply aren't good at dealing with money. You would think entrepreneurship and financial acumen go hand in hand, but that's not always the case.

Clearly, that can turn into a big problem. While it might not cripple or even kill a company, at the very minimum it's going to be a drag on both the bottom line and your growth potential.

For your business to be the best it can be, you always should be challenging your financial thinking and strategy, looking for an edge.

Looking for Other Lenders

I recently met a business owner of a waste management company. He has a fleet of 50 trucks and he's hoping to grow his fleet. The company is profitable and stable.

The entrepreneur has been borrowing from the same bank for years. He has a good relationship with the bank and receives generally reasonable interest rates with no personal guarantees required. It's hardly a bad financial situation therefore he has not challenged the relationship.

Out of the blue, for whatever reason, the bank has decided to slap on covenants that restrict how much the business can grow.

When I spoke to him, the owner was philosophical about the news -- that's the way things sometimes go, he said. He figured it wasn't worth it to rock the boat, aka a conservative part of his company's DNA.

That's absolutely the wrong line of thinking.

You should always consider other financing scenarios. What's the harm? In this case, since he doesn't have a terrible situation with his existing lender, he can always maintain status quo if need be.

I suggested that he look at the possibility of a $5 million, 10-year Small Business Administration-backed (SBA) loan that wouldn't have the covenant and would offer comparable (if not better) terms.

If you find yourself restrained and have the means to remove that restraint, by all means do so, especially when it comes to financing. Just because you'd rather be more involved in a more interesting part of your business -- one that appeals to your company's core -- doesn't mean you shouldn't be trying to stretch your entrepreneurial "genes."