I hope everyone had a great week and that you’re looking forward to a great SHOT SHOW 2018. It’s Friday and time for our weekly shoot the shit topic.

I chose this subject because our industry is a living and breathing example of American ingenuity. The entrepreneurial spirit lives in companies that day in and day out deliver innovative products and technologies to our military, law enforcement and outdoors community. Over the years, I’ve had the opportunity to get to know and report on several of these companies since they were just a gleam in their founder’s eye; only to see them grow into small businesses and global competitors. Only in America! They achieved success in spite of burdensome ITAR regulations and by avoiding consultants.

I have nothing against consultants, but you really don’t believe that do you? All kidding aside, consultants at the right time in your business’ life can be very useful, but involving consultants too early in the game will burry you! So, what brought all this on?

I was sitting at a local book store having a little coffee and thumbing through Ballistics Magazine and sitting next too me were three men one of whom was a consultant. I didn’t mean to eavesdrop but they were speaking loud enough where I really had no choice.

The consultant was discussing the business plan. He was talking about identifying competition, market conditions, the value proposition, audited statements and pro forma financials, risks to the business from economic conditions, etc. etc. Something you need to know right now is that consultants are like attorneys, they bill time and depending on the consultant, or your business, just researching competition could take a month or more of consultant time.

So, anyway, I’m sitting there saying to myself “Damn I’m listening in on a potential IPO or venture capital project!” As it turns out, these two guys, the clients, were looking for a $50,000 bank loan. I almost stood up and chased the consultant’s ass out of the place!

Those of you just starting out in business need to clearly understand some very important things:

1. Banks are lenders not your partners.

2. A bank wants to know several things

   1. How much of your own capital you have invested. If you are using the bank to get you started you can likely forget it.

   2. The bank wants to know what your source of repayment is. If your source of repayment is business income, you’ll need several years of tax returns, bank deposits or other verifiable proof of income. You’ll need to answer this question precisely and prove its accuracy.

   3. A bank will also look closely at the credit history of each of the principals. Bad credit or no credit equals no loan.

   4. Banks will ask you for collateral as well. They may require you to assign your accounts receivable and/or inventory and require you to place personal property, such as real estate,  as collateral. Whatever you think your receivables or inventories are worth, the bank will value them at 50% less than fair market value. If you have little or no equity in your personal real-estate you will likely be declined.

3. Note that most commercial lenders will see you as a miscreant if you ask for a $50,000 loan. Forget a lunch invitation, so you may want to have eaten something beforehand. The moral of the story is that small deals won’t get you lunch and you don’t need to retain a consultant to get a small bank loan!

Have a great weekend readers! Be safe and have some fun with your buds and family!