“That accounts for a good deal….. It explains everything. No wonder!” So said Eeyore, in his seemingly perpetual, gloomy way, in a tale about a tail in which the owner hadn’t realised it was missing. Confining his knowledge to himself he inevitably is a bit depressed but gives consideration, on this occasion, to the ‘why’s, wherefore’s and which’s’ and, comes up with the conclusion of not feeling ‘at all how for a long time’. On the map of 100 Acre Wood, Eeyore’s Gloomy Place is ‘rather gloomy and sad’ and with a house, which keeps falling down and he has to keep rebuilding, ‘again and again…’
He doesn’t have too many expectations of himself and it’s not the first time the tail has gone missing – Usually found by his well-meaning friends and fixed back on, none too permanently, with a drawing pin. Pooh Bear pointed out “it’s either there or it isn’t there… And yours isn’t there!” To which the not unintelligent Eeyore’s response was, “Then what is?”
Similarly, these are the responses that are heard from business owners, when they’re contemplating additional funding for their businesses. What is, or isn’t, in a small business that can explain (almost) everything about their business. What would account for a good deal or what, in the Accounts, show it’s not a good deal? What can give off the reaction of ‘No wonder!’
Businesses need liquidity and lenders seek equity, with the financial ratio between the two being the piece that can link the two for a solution. Taking into account any, and all, assets isn’t always sufficient when looking for financial leverage for a specific problem. To measure a business’s situation the profits and losses need scrutiny, it’s surprising what can be found amongst the numbers; regular checks are vital to make sense of how disciplined the business is, or if there are any leaks. With lenders having products that aren’t available for the masses, items such as indicators, year-end values and Accountancy methods are the combined explanations needed for a realistic overview of a business, because with good business practice, it’s either there, or it isn’t there. With lenders seeking out the businesses that illustrate their abilities to understand their market, it could be heads you win, tails you lose.
(Image and Article credit: Copyright SUF)