Debt, Credit, and the 7th Law of Wealth and Abundance

This may be the most important and relevant law to today’s businesses from Ron Willingham’s book, “The Ten Laws of Wealth and Abundance”.  These last few years have been extremely challenging for business owners that had needs for cash from loans or investors.  I think this 7th law reminds us of some fundamental truths about borrowing, as only Benjamin Franklin could articulate in his direct and helpful way in the book.

The 7th Law of Wealth and Abundance states:

“BORROW ONLY WHAT YOU HAVE THE ABILITY TO REPAY”

“Credit can be one of your most important business tools, or it can drag you down into the mire of poverty.  The use of credit is an honorable activity for those knowledgeable in the laws of it.  Do not make debts that strain your future or in which repayment depends on miracles.  Keep your creditors well informed.  Should you have current or past due debt, go to your creditors and ask to work out a systematic plan.   They will be impressed with your honesty and steadiness, even though you consistently pay back only small payments.  Small payments, regularly made, will bring you their everlasting respect.  Few things will block your road to wealth and abundance as will unwise borrowing”

I could say the 7th Law in a variety of different ways, but it comes down to knowing your business can repay or deliver a good return, and then demonstrating that to the lender or investor.  Partners with B2B CFO® have good relationships with many banks, investors and alternative financing sources.  Whether you need funds as a loan or as equity, for growth, new product development, or seasonal cash flow requirement, there are funding sources available.

However, tapping into these funds is not easy.  A starting point is a well prepared request for funding. Typically this requires a well drafted plan with detailed financial projections that make sense and are supported by solid assumptions and expectations.  Benjamin Franklin’s apprentice in the book had this to say about projections:  “A mistake I have seen many people make is to be too optimistic about their ability to repay”.  In my own experience, I have also seen this play out in several circumstances.  If the business owner can articulate and demonstrate the profitability of a project or investment and discuss the risks involved, they are well on their way to obtaining funding.  My strength is in preparing projections that accurately reflect the business owner’s plans and supporting it with solid assumptions.

The other critical aspect of this law from my experience is to be open and honest with your creditors, providing timely information on your standing.  Deliver financial reports when expected and promised , discuss the challenges you are are facing and be up front in working through any delays in payments that may be necessary, and deliver what you promise for payments.  Having a solid relationship with your existing bank can be instrumental to obtaining more funds.

Reducing worries over cash flow challenges, securing loans or other funding, and preparing projections that can provide peace of mind in many areas are all benefits that B2B CFO Partners strive to deliver to clients.  I would welcome an opportunity to talk to you about your credit and borrowing challenges.

photo credit: Impaled by Credit via photopin (license)

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