Business Balance Sheet and Escrow Loans

(small and medium size businesses)

by Dr. Jason Kuruso

Learn to think about money the way a banker does - as a bookkeeping entry -and get your balance sheet to work for you.

Wouldn't it be wonderful if one's business could create net worth just like a bank? With an accommodating financial institution and a little creativity on the part of the business owner, it is possible. The case history that follows shows how small businesses can use these methods to get the financial help they need. The names were changed but the following examples are real live transactions undertaken by our company (consultant).

William Ballast is the owner of a wholesale distribution company. When one of his suppliers Announces a gigantic inventory sale, Ballast is eager to take advantage of it. He knows that if he can increase his inventory with goods at the lower price, his average unit cost will be lower and profits would increase accordingly.

Balance Sheet Debt Financing

Ballast calls a financial consultant to discuss his problem. Ballast is advised to submit a current Balance sheet reflecting higher cash assets to obtain a more favorable line or credit from the wholesaler. Although Ballast favors such a move, he also wants to avoid a long term debt commitment. He fears that the interest payments from such a debt would wipe out any gains made by buying the additional inventory on sale. The consultant explains that the assets are placed as equity not debt, which pleases him even more.

Using Escrow Loans to Purchase Commercial Property

Robert Jensen knows of a valuable parcel of land that he believes could be profitably developed. If he could get an option on the property, he could organize a highly successful joint venture to develop the land. Jensen is afraid that if he doesn't act quickly, someone else will buy the land from under him. He needs time to secure funding for the option and line up partners for his joint venture.

As a result of the above transaction, Jensen now holds substantial equity in a commercial real estate development worth several million dollars. His only costs up front were a few points for the use of the assets, the escrow account, and the supporting documents that went to the various interested parties.

The financial and banking world has changed in terms of small businesses being able to obtain any type funding (debt or equity). The sooner the small business entrepreneur learn to turn to more creative and non-conventional means of going after financing for his project, the sooner he will be successful in obtaining financing. The above examples are fairly simple and one-hundred percent legal transactions and will work every any day of the year. But you will not find it listed your friendly collage accounting/business courses, thus is the term "think outside of the box". If the reader can learn to think about money the way a banker thinks of it - as a bookkeeping entry - then he can get his balance sheet to work for him.

Happy and Successful Funding!

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About the Author

Dr. Kuruso is a principal in his own financial consulting and investment banking firm. and has mentor for SBA and over 2000 private small business over the past 15 years in such time His firm has invested in over 1500 publicly and private businesses.

Fargo Financial

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