What Ice Cream Can Tell You About Choosing a Funding Program

Mar 9, 2021

Every business owner wonders what the best funding program is for their business. We think ice cream can help put things in perspective.

Imagine you've never had ice cream before. Now, imagine walking into a Baskin-Robbins and being asked to choose the “best” flavor from all 31 – none of which you’ve ever tasted. Feeling overwhelmed?

Choosing the best funding program for your business isn’t all that different, especially for business owners who are new to the funding game. And just like ice cream, the “best” program is totally subjective. You may love mint most, while a pistachio lover thinks it tastes like toothpaste. And that doesn’t even begin to cover the complicated world of toppings, sundaes and other temptations!

In reality, the right funding program for your business is based on a number of factors, including:

  1. Your current business risk factors (e.g., monthly gross sales, years in business, average daily balance, industry).
  2. What you're trying to accomplish with the capital.

Rather than scanning a menu board and picking the option that “sounds good” based on automation, we can help you choose the one that will really hit the spot for your business. 

Take this example: A small business owner – we’ll call him John – was in need of additional working capital for inventory over the holidays. His business averages $90,000 per month, and he had just taken out $50,000 over 18 months for inventory three months prior. According to John, he only needed another $50,000, and wanted the longest term available. Using an automated lending service, John got exactly what he wanted.

However, if John had come to us, we would have taken a deeper look at his funding needs. Given that the sole purpose for the $50,000 was inventory, we’d advise John to keep the term as short as possible (within his comfort level for the payment) in order to keep the total cost lower. This would also keep his exposure low, providing flexibility in case he has a sudden need for capital three months later. 

Finally, we’d make sure that $50,000 was enough to carry him through the next 18 months. That’s a long time in the life of a small business; there’s another holiday season in there, after all! 

When deciding on a funding type and amount, It’s crucial to account for not only what you need today, but what you're going to need down the road. That’s where we come in. And while going back to the Baskin-Robbins counter over and over until you find the perfect flavor will only lead to a stomach ache, taking a trial and error approach to funding your business can have much more serious consequences.