Published December 2002

Adviser: Improve cash, lending position via Web

By Kimberly Hilden
SCBJ Assistant Editor

Getting a business off the ground takes money. Growing a business takes money. And over the years, clients of the Edmonds Community College Small Business Development Center have learned how to secure financing through the lending industry to do both.

First, business owners need to show the lending institution that they know their business inside and out — with documented market analysis, a break-even report and detailed financial projections, SBDC Director Ron Battles said.

So, the SBDC, an organization supported in part by the U.S. Small Business Administration, developed a series of business development workshops to help business owners learn for themselves how to develop and implement a business plan to secure financing.

Next, business owners need to understand cash management to make the money they secure — and generate — work for them, Battles said. They also need to know what their funding needs are well in advance, so that they’re not strapped for cash when they decide to go to the lender, but are following a pre-set plan for growth, Battles said.

So, the SBDC included in the business development workshop series a session on cash management.

Then came the power of e-commerce — not the dot-com fiasco of “virtual businesses” popping up and crashing down in the late 1990s, but the steadily changing patterns in the way people buy and sell goods via the Internet. It’s a pattern, Battles said, that has led to increased sales for traditional businesses that have taken advantage of the Web.

“With an inexpensive Web site, but one that integrates a company’s business plan — leveraging what it has to offer to a defined market group — a company can see an increase in sales thanks to greater accessibility to markets,” Battles said.

So, in July 2001, the SBDC created an e-commerce development program by adding a new workshop session on essential e-commerce and then providing free follow-up business counseling with an e-commerce assessment to help business owners achieve business goals on the Web.

What does this have to do with lending?

Two things, Battles said.

First, improved cash position.

The small-business owners who developed their Web sites through the SBDC’s e-commerce development program, numbering more than 60, have reported, on average, a 15 percent increase in sales revenues, often without having to increase the advertising budget or sales staff, Battles said.

More options appear for a business with improved cash position, he said, such as the ability to pay off a loan earlier because more cash is coming in or going to the lender to secure a better loan package.

Take Bob Wydro, for instance.

The owner of GunTown, a Lynnwood retailer of new and used firearms, took the SBDC’s e-commerce course, and by doing so, said he learned to use the Web more effectively.

“I was not interested in doing high-volume sales off the Internet, although there are those in my business who do that,” Wydro said. “I was interested in using my Web site (www.guntownonline.com) to bring people into my store. ... So, through the workshop, I learned how to use my Web site to do that.”

He emphasized the importance of his 30-day guarantee for used firearms on GunTown’s home page and created a regularly updated “Specials” page and a “Collectibles” page, as well as a “Location” page so that would-be customers could find him.

Wydro also has implemented a “Gun Search” function that enables prospective customers to request a price quote.

So far, the response has been promising, he said.

“I will get at least one or two e-mails a day from somebody who is asking for a little bit more information,” Wydro said.

He also has been able to cut his advertising budget, thanks to viral marketing, increasing his cash flow and allowing him to go to the bank to get better deals, he said.

And the second thing e-commerce has to do with the lending function?

In the form of a Web site, it can act as a digital business plan, Battles said. “Borrowers of the future can tell lenders to check out their Web site to see how the business is structured,” he said. “... It enhances the negotiation process. It’s one more tool for the lending agency to look at objectively.”

Already, the Web is connecting would-be customers with lenders, said Michele Bye, a commercial loan officer at Frontier Bank.

“When we’re trying to research possible prospects, one of the things we do is we look on the Internet to see if they have a Web site,” she said.

“E-commerce has taken a lot of people by surprise,” Battles said of the need for e-commerce training for business success. “... People have to be brought up to speed, and business owners need to be able to tell their Web designers what they want.”

For more information on the SBDC’s business development workshop series, which includes business-plan development, strategic marketing, cash management and essential e-commerce, call 425-640-1435 or visit on the Web at www.btc.edcc.edu/SmallBusinessDevelopment.

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