Back in the late 70s, two unemployed journalists went to play a game of Scrabble one night. When they opened up the game, they realized that they were missing a couple of tiles. So they hopped in the car to go buy a new set, and then it hit them: How many Scrabble sets did they buy over the course of their lives?
Right then and there, they decided what they really needed to do was invent a new board game that didn’t require so many pieces. Like many entrepreneurs, they cobbled together the funding they needed using a combination of their own savings, loans and the help of friends and family. In total, they raised a little over $70,000 and each investor got 1 percent of the company.
The game they created? Trivial Pursuit. Not a bad investment, right?
Once the game became a big hit, the inventors went to a bank for a traditional loan to grow their business. These inventors understood that banks are a valuable resource in terms of lending small businesses money.
This story is still true today and can be seen in the latest iteration of the Bank of America Small Business Owner Report (SBOR), a bi-annual survey that looks at the health of small businesses in the United States. The latest findings indicate that many small businesses are having their financial needs met by the lending community.
- 67 percent of those surveyed said they had enough access to capital to effectively run their business
- Almost 80 percent of those surveyed who applied for a loan within the previous two years, were approved
Before you answer, it is important to note why you might want to consider getting a bank loan. The fact is that without financial capital, the ability to grow your business is severely restricted. The only funds you will have for growth are your profits, which may be enough for some small businesses, but not for all.
The SBOR found that businesses planning to take out a loan intended to use their capital to do the following:
- 43 percent would use funding from a loan to invest in new equipment: Equipment can be expensive, but you simply must stay on top of technological changes in your industry. Without great equipment, it becomes difficult to maintain a thriving business.
- 40 percent would use it to market their business: The only way to get new customers is by marketing your business, and then marketing it some more. Using a loan to get more business is smart business.
- 34 percent would use it to expand operations: Expansion might mean getting a second store, or even just expanding your current location. Either way, it definitely also means you will be better able to serve more people.
- 29 percent would create a new product or service: If you keep selling the same goods or services, you will keep getting the same results. But with additional capital you have more availability to create a new offering, and potentially set yourself up for growth.
- 26 percent would hire more employees: The same idea applies here. Unfortunately, you can’t do all the work by yourself, and an overworked entrepreneur and staff makes for poor customer relations. By getting the capital you need to bring on additional staff members, you can make your business both more professional and capable of serving more people at the same time.
Overall, by obtaining the capital you need through small business loans, your business’ bottom line can be well-served.
How would you use capital to grow your business? Share your story below.
About Steve Strauss
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest,The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss