If You Are a Small Business Owner, P.R.A.Y. for Financing | Enterpreneurship

Written for EO by Andrew Frazier, MBA, CFA, SBPro

For many entrepreneurs and owners, securing financing is one of the biggest challenges. Certainly, financing is more difficult than it used to be, but early stage entrepreneurs also struggle to do the work needed to be in a position to obtain financing.

I suggest small owners P.R.A.Y. to get capital. No, I don't mean get on your knees and pray (though, that probably doesn't hurt). I'm talking about this four-step process to increase your chances to getting the right financing: 

  1. P repare yourself and your business.
  2. R esearch the types of financing, lenders and investors to determine the best fit.
  3. A ssemble the necessary documents quickly and accurately.
  4. Y ield, meaning be patient and allow the lender or investor to drive the process. Also, be flexible enough to respond to the lender's needs efficiently.

Preparation means assessing your current standing—your credit (report and score), net worth (assets minus liabilities) and disposable income (income minus expenses).  Also, keep your financials up to date and create a sound business plan along with realistic financial projections.

It always surprises me how many business owners are behind in submitting their personal or business tax returns. Without filing your tax returns, you'll find it almost impossible to obtain financing. Lenders and investors use these to analyze your profitability because they know it's very rare for people to overstate their personal income and overpay taxes.

Once the personal and business information is prepared, you'll need to determine how much capital you need to run the business. Many entrepreneurs and small business owners either over- or under-estimate how much money they need because they are anxious to get started. Prove that you understand your business plan thoroughly with a detailed estimate for three months of fixed expenses as working capital.


There are thousands of financing options, and you need to research your options and determine the best fit for you and your business. Lenders and investors have differing criteria, industry preferences, funding ranges, expectations for repayment and required return on investment. Before you approach a funding source, make sure that you're “fishing in the right pond.”


Just like applying for a mortgage to purchase a home, financing a business takes plenty of paperwork and documentation. Gather as much as you can in advance. For example, three years of personal and business tax returns, a personal financial statement (PFS), year-to-date financial statements, aging reports (accounts receivable and payable), a debt schedule and a business plan or summary. Other items to submit may include a driver's license, bank statements, sales by customer, company formation documents, equipment list, resumes, certifications, agreements, and contracts.

There are many additional items that may be requested up front or throughout the underwriting process. The quicker documents are submitted, the faster applications are processed.

Assembling these documents in advance reduces stress and helps ensure that accurate information is submitted on a timely basis.  They should be in an electronic format to be easily emailed or uploaded upon request.


Being flexible and yielding to underwriters or analysts is often the hardest part. For entrepreneurs who are eager to take control and move forward, it can feel frustrating to submit control of the financing process. Plus, even after being approved, it doesn't necessarily mean that the deal will close with you having access to capital. Financing can fall apart at any time until the money is in your company's bank account. Even so, there's nothing you can do but yield and hope for the best.

By P.R.A.Y.ing for financing, small business owners will increase the likelihood of financing, maximize the amount they receive and access the funds faster than otherwise possible.

Andrew Frazier, MBA, CFA, SBP is the president of A&J Managment and Business Pro at Small Business Like a Pro. He is also the author of Running Your Small Business Like A Pro.

The post If You Are a Small Business Owner, P.R.A.Y. for Financing appeared first on Octane Blog – The official blog of the Entrepreneurs' Organization.

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