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FinancingMistakes_Body.jpgby Cindy Waxer.


You don’t need a degree in macroeconomics to manage your small business’s finances. In fact, there are plenty of resources, from bank managers to accounting software programs, that can help you wade through the ins and outs of loans, bills, and pay checks. Yet many entrepreneurs continue to make simple mistakes that can easily jeopardize their companies’ bottom line and brand.

Here are some of the most common financing blunders small businesses make— and how to avoid them.


Banking on a good idea.  

You may have come up with an incredible concept for a new business but don’t expect investors to come banging down your door. “There are a lot of people who think they don’t need anything but a good idea to receive a loan,” says Linda Pinson, a Tustin, Calif.-based small business consultant and author of Anatomy of a Business Plan. “But the reality is, you need good credit and good equity.” For this reason, Pinson recommends small business owners take steps to improve their credit score and carefully examine their financial assets before seeking out capital.



Failing to take a government-backed loan seriously. 

While the U.S. Small Business Administration guarantees some $12 billion per year in loans, many small business owners assume that all loans are backed by the government. In fact, Pinson says, “A lot of small businesses don’t really understand the rules for qualifying for a loan and think that if they apply for an SBA guaranteed loan, it’s like getting a loan directly from the government.” Instead, Pinson says that not all small business loans are SBA guaranteed, and those that are still require prompt payback including interest charges.

Viewing all types of credit as one in the same. 

No two types of credit are created equal. In fact, Dana Karlov, owner of Bagable Gifts, a Chicago-based provider of high-end gifts for special events, says that while she obtained four lines of credit through her bank, she intentionally avoids using credit cards to subsidize her business. That’s a smart strategy, especially if you’re strapped for cash, according to Pinson. “If you’re already in a jam, it’s certainly not a good idea to get yourself even further into a jam,” she says.


FinancingMistakes_PQ.jpgThat’s because credit cards can come with high interest rates and can be difficult to pay off. Even worse, many entrepreneurs use personal credit cards to subsidize their businesses, which can damage your FICO score if payments are managed properly. In fact, the Meredith Whitney Advisory Group reports that 82 percent of small business owners use credit cards as a “vital part” of their overall funding strategy.


Nevertheless, relying on a low-interest credit line to run your business is no easy ride either. Karlov says, “I make it a point to pay off my minimum each month and to make all my payments on time. I also made sure the interest rate was manageable so that I could cover the costs with my company’s profits.”


Secure financing. Now relax.

Now that you’ve obtained the financing you need to run your small business, the rest will just fall into place, right? Wrong. Many small businesses rely on accounting software to manage their lines of credit, credit card expenses and loans. “I’m not a math or accounting person,” admits Karlov. “Intuit’s QuickBooks has really streamlined the process for me and takes the stress out managing my finances. It’s very easy for me to see where my money is going.” What’s more, accounting software can ensure that a line of credit or SBA-approved loan is actually helping to generate revenue for your company.

Body_QAmichaeloshman.jpgby Susan Caminiti.


The next time you eat out, take a look around at what remains on all those plates. Ever wonder where all that food and trash ends up? Michael Oshman has. As founder and executive director of the Green Restaurant Association (GRA)—a national, non-profit based in Boston—he’s been working to shift the $630-billion restaurant industry towards ecological sustainability by setting standards that certify a restaurant as “green.” Oshman recently spoke with business writer Susan Caminiti about educating restaurant owners, how even small changes can make a difference, and why sustainability is good for the planet and a business’s bottom line.



SC: You say on your website that the GRA was founded in 1990 to help the restaurant industry reduce its harmful impact on the environment. In what way?

MO: There are nearly one million restaurants in the U.S. and together they produce hundreds of thousands of pounds of garbage each year. The industry is also the largest consumer of electricity in the entire retail sector. So it has a huge impact on the environment. Before I started the GRA there were already small environmental groups speaking out against things like the use of Styrofoam in restaurant packaging. We’re not the green lobbying arm of the restaurant industry. Our loyalty is to help save water, waste, energy, and reduce the use of toxic chemicals. So what we did is create a systematic way to motivate the industry to move towards a more sustainable way of doing business.


PQ_QAmichaeloshman.jpgSC: How did you do that?

MO: By establishing clear standards of what a restaurant needs to do in areas such as water efficiency, energy, and waste reduction and recycling, to name a few, in order to be certified as green by our organization. We can certify any food service operation, including restaurants, university dining halls, bakeries, and corporate cafeterias. So far, we have 850 restaurants that are green certified by us or in the process of being certified.


SC: Why does any of this make a difference for a small business owner with just one or two restaurants?

MO: If it were just that one owner who didn’t recycle or didn’t compost, it wouldn’t make any difference. But that’s not the case. It’s the collective actions of many, many businesses, small and large, that make the impact. And there’s so much a small restaurant owner can do now that they couldn’t 22 years ago when I started.


SC: Such as?

MO: Take the spray hoses that every restaurant has to wash off dishes. There are commercial grade hoses available now that conserve water and are also energy efficient. They cost about $70 or so but can save a restaurant anywhere from $1,000 to $2,000 a year on energy. Water-saving toilets are another option. You don’t have to go to the edge of Alaska to get something like that anymore because there are more companies out there selling them. Lighting is another area. The bulbs that restaurants are buying now are likely to be much more energy-efficient than anything on the market 22 years ago.


SC: Where does composting fit into all this? The whole farm-to-table movement has certainly taken hold, but there’s still a lot of uneaten food that restaurants have to dispose of.

MO: The food waste in restaurants accounts for about half of all its waste. It’s huge. To be able to get rid of half your waste—that’s amazing. And to have a method by which that waste will go back into the soil to be used to grow more food is even better. It stays out of the landfills and goes back into the soil. So composting is among the top-10 list of things that restaurants should do.


SC: What percentage of restaurants follow this advice?

MO: In major cities across the U.S., such as New York, Washington, D.C., Boston, and Chicago, restaurants have to compost in order to be certified green by us. (A list of all the cities can be found here). We started with the cities because we wanted locations where there were already two or more composting companies operating so that there would be a little price competition.


SC: Was that a difficult adjustment for these restaurants to make?

MO: Everything is an education process. If you’re already recycling, then you’re already on the way to composting. We’re not asking these restaurants to have a giant composting pile out back. They already throw out all their food waste in a trash bin. The change comes in arranging for that waste to be picked up for composting rather than to be taken to a landfill.


SC: What’s the ROI on all this for a small business?

MO: I like to answer that by turning the question around: Is there a return for a restaurant not to be green? That’s the question that’s getting harder and harder to answer yes. Just using the right light bulb saves energy and money. It’s not theoretical; it’s real. Restaurants can reduce waste by 95 percent by composting and recycling. They can save up to $2,000 a year with a more energy efficient water hose. They can reduce their liability by using less toxic cleaning chemicals. How do you argue against that? If I was teaching at the most conservative business school and even left out the environment perspective—just spoke about the financial implications of doing these things—a company would be irresponsible not to make these moves.


This interview has been condensed and edited.

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