Finance

The problem of small businesses is that the entrepreneurs have more enthusiasm than managerial skills and capital. It is capital that enables entrepreneurs to get started; buy needed goods, services, labour and buildings; and keep the business going. Some of the financial reasons for failure are:

• Starting with too little capital

• Starting with too much capital and being careless in their use

• Borrowing money without planning how and when to pay it back

• Trying to do much business with not enough capital

• Unexpected expenses

• Extending credit too freely

Entrepreneurs, like most people, are not highly skilled at obtaining, managing, and using money. Inadequate capitalization or poor financial management can destroy a business even when the basic idea behind the business is good and the products are accepted in the marketplace.

Notes:

To draw up documents – збирати документи

to be turned down – отримати відмову

to bear – терпіти, зносити, витримувати

VI. Reading and comprehension.

13. Read the text c. Define the main points of the text and summarize them. Advise your friend how to get a credit. What a Banker Wants To Know

To maintain a good relationship with a banker, you must demonstrate professionalism and competence, says Henry W. Gardner, vice president at Bank One in Salt Lake City, Utah. According to Gardner, when a business owner asks for a loan, this is what a banker wants to know:

• How much money do you want to borrow?

• Why do you want the money, and how will it be used?

• What is the primary source that will generate the funds to repay the loan, such as selling a building, selling inventory, or increased business?

• What is the secondary source of repayment, such as liquidation of equipment or injection of additional capital by the firm's principal?

• How will the loan be secured (collateral)?

• Who will guarantee the loan? (The owner should be taking more risk than the banker.)

The 3 Ts of a Good Banking Relationship

Nearly everyone looking for a loan learns the five Cs of credit, which are: character (how trustworthy you are), capacity (your financial strength), capital (the amount of your own money invested in the business), collateral (assets available to back up the loan), and conditions (the state of the economy and your industry).

Mitch Hurley, vice president and manager at First Security Bank of Utah, says that in addition to the five Cs, banking relationships are built on the three Ts:

Talk: For a relationship to thrive, the business owner needs to talk - communicate - regularly with the banker. The talk must be frank and open, even when reporting a negative development.

Time: A relationship takes time to grow. Don't rush it, and don't expect it to bear fruit immediately. Like friendships, a good banker relationship will age well over the course of its duration.

Trust: With honest, frequent communication and time, trust develops, which is "the foundation of the relationship," emphasizes Hurley. When trust exists on both sides, the relationship has the crucial component to make it a lasting one.