With business financing, it’s often tough to separate fact from fiction. The small business loan process can feel intimidating, complicated, and downright scary for a first-timer or a new business owner. As with most types of financing, specifics of business funding can differ between applicants, which makes it tough to get the lowdown on what you might expect for your business.
To paraphrase an old saying, a myth can spread halfway around the world while the truth puts on its shoes. Anecdotal evidence from other entrepreneurs can be helpful, but it may not apply to you and your specific needs. It’s hard to separate fact from fiction, but here are a few of the biggest financing myths out there.
Editor's note: Looking for the right loan for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.
1. You Have to Have Perfect Credit
This is one of the bigger business financing myths out there—that entrepreneurs have to have a spotless credit history in order to qualify for a small business loan. Although good credit certainly improves your odds of getting a loan, you don’t need to have a squeaky clean credit history just to get your loan application noticed.
The truth is, your credit score requirement varies depending on the kind of loan you’re after. Small Business Association (SBA) microloans, for example, often approve applicants with less-than-stellar credit. Short-term loans tend to be more generous with their credit requirements as well, with many lenders targeting scores of above 550 and above.
All that said, your credit will come into play when applying for business financing, so it’s a good idea to start taking steps to improve your score if you want to secure the best financing possible.
2. You Can Only Finance Large Amounts of Money
Many small business owners incorrectly assume that business financing is only appropriate for applicants who need a lot of money to fund their growth. And though traditional banks tend to prefer larger loans that are worth their time and investment, there are many microloan options out there that work for small business owners who need more cash than they have on hand.
For example, the SBA Microloan program offers amounts up to $50,000, with averages falling closer to $13,000. Some SBA intermediaries even offer microloans for amounts as low as $500. If you don’t need a big loan, there’s no reason you should take one out. There are options for business owners who require smaller amounts of capital to meet their needs.
3. Getting a Business Loan Will Take Months and Months
Sometimes you can plan ahead and submit your business loan application months before you actually need the cash in hand. But for those instances where you need the capital fast, a business loan is out of the question — right? Wrong.
Years ago, the only way to secure business financing was to compile endless records, head to your local bank and wait weeks (or months) to see a dime. These days, a small business owner can complete an application for many lenders online in under an hour and see the cash in as little as a couple of days. Though you may need a little extra time to produce necessary documents such as balance sheets or bank statements, many alternative lenders specialize in funding small business owners quickly when they need the money.
4. You Have to Offer Collateral to Get Business Financing
Collateral can be a scary part of the borrowing process for some small business owners. After all, you’re taking out a loan because money is tight in the first place, so tying up some of the capital you have in a loan seems almost self-defeating.
Although many loans do require you to offer collateral in exchange for financing, that’s not true for every kind of loan. There are plenty of small business loans with no collateral requirements, such as unsecured business loans, unsecured business lines of credit, merchant cash advances, and business credit cards. Each of these options won’t require you to put up collateral to get access to cash—instead, your lender may ask for a personal guarantee, which is another way of saying that you’ll be personally responsible for paying back what your business owes. If your business misses payments or defaults on its loans, the people who signed on the loan will have to cover the balance out of their own pockets. This might be a worthy trade-off for you, depending on your business’ financial position.
5. All Business Financing Options are Alike
Business loans aren’t quite like snowflakes, but they’re definitely not cookie-cutter, either. Loans vary on a case-by-case basis: your business needs, finances, credit history, and plans for the funds all factor into the loan offer lenders will provide. A loan that helps you purchase inventory will come with different terms and conditions than, say, a loan to roll out a huge new marketing campaign.
Lenders pay attention to specific risk factors before they make you an offer. The terms you end up getting depends largely on your own financials and the intentions you have with the money you’re borrowing. The best thing you can do as a borrower is to enter the process with as much information about your business as possible and to be prepared to answer questions about why you want the money in the first place.
6. You Can’t Get a Loan to Start a Business
It’s often easier for existing businesses to get loan approval since they have a longer financial track record and credit history. But that doesn’t mean lenders don’t open the vault for brand-new businesses.
The SBA Microloan Program is startup-friendly and offers business loans up to $50,000. Because the SBA partially guarantees the loan, lenders are incentivized to take on riskier applicants than they may otherwise have considered. Equipment loans are also a great option for start-up financing, as they don’t require collateral or nearly as long a credit history in order to get approval. Last but not least, a business credit card can provide new business owners access to working capital, even if they haven’t been in business for a long time.
No matter what your small business financing needs are, there’s an option out there that’s right for you. Before you set out to finance your business, do your homework, know your business inside-out, and don’t be afraid to reach out to professionals for help. Do this, and you’ll be on your way to getting the cash you need to take on the next step of your entrepreneurial journey.
A core challenge of management is to ensure that the organization’s priorities, strategies, and metrics are consistently embraced and that any impediments are identified and addressed quickly. At Salt Lake City-based Intermountain Healthcare, ensuring the alignment of all these things to provide extraordinary care requires a constant regimented focus across our 23 hospitals, 170 clinics, and 850,000-member health insurance plan. To achieve that, we have implemented a model of daily huddles on an extensive scale. In this article, I’d like to share the insights we’ve gleaned from the model’s first full year of operation, which hopefully organizations in health care and many other industries will find useful.
The model has been used in other industries and has parallels to the “teams of teams” approach in the agile method of operating that has become so popular. But the scale at Intermountain Healthcare, where more than 2,500 huddles occur every morning, makes it especially illuminating and instructive.
At Intermountain, the 15-minute huddle is the key. It enables knowledge from activities throughout the organization in the previous 24 hours to escalate up to executive leadership — Tier VI in our model — and be addressed.
Using that 15 minutes effectively requires structure: Each huddle has a leader; the participants are designated, as is the recorder of the data; the huddle is scheduled; and the categories of reported information are captured on a prepared chart. We have four fundamentals of extraordinary care that are covered in our daily huddles: safety, quality, access, and stewardship of resources so they are used to provide the best possible care. Across those fundamentals, eight key topics are reported every day. They include potential serious safety events that could have harmed a patient, caregiver injuries, and reported downtimes (of equipment, elevators, systems or processes, for example).
The information that escalates up falls into two categories:
Issues that cannot be resolved at a given tier
Metrics that are reported daily, such as “units at capacity.”
Information flowing back down includes follow-up reports on previous action items.
Every action that emerges, including those at Tier VI, is tracked, and the outcome is communicated back through all tiers, so participants know what has transpired and understand the value of their input. After each Tier VI huddle, for instance, the recorder sends an e-mail to the person who owns each action and follows up to ensure that resulting outcomes are communicated. An item is not removed from the action register until follow-up is completed and conveyed. Interestingly, despite the number of huddles, the number of action items has never overwhelmed the system.
Beginning at 8:45 AM, care teams and managers in our hospitals and clinics gather in more than 1,500 Tier I huddles. At 9 AM, their reporting is considered in about 170 Tier II huddles, consisting primarily of directors of hospitals and clinics. By 9:15 AM, the reports of those directors are considered in Tier III huddles by hospital administrators and geographical clinic groups. Their findings and needs are, in turn, considered 15 minutes later in Tier IV huddles of affinity hospital groups such as trauma hospitals, rural hospitals, home care, and the Medical Group. Their reports escalate further to Tier V, consisting of major organizational areas such as all hospitals and community-based care. By 10 AM, vital information has risen to the executive leadership, which includes the CEO and his direct reports plus other assigned functional executives.
The entire process, which involved 652,080 huddles in the first year, is monitored by Intermountain Healthcare’s Continuous Improvement Team, and the categories of information collected are reviewed quarterly. The Continuous Improvement Team consists of about 50 caregivers who are spread geographically across the system. Team members have varied experience from industrial engineers to nurses and physicians, and a physician has responsibility for the team. Their focus is culture-based, not project-based, since we believe that real change and improvement come from a culture of continuous improvement aligned with strategy and a daily management system.
At every tier, needs that can be addressed at that level are resolved, while remaining ones, along with accumulating data, escalate up. The process provides three key qualities — clarity, alignment and accountability — for patients and caregivers alike.
The reporting lets executive leadership know precisely what is happening and unlocks frontline wisdom. It ensures alignment of goals, resources, and people. It pushes out responsibility and accountability to the frontline and enables executive leadership to intervene to remove barriers and release resources. It connects to the organization’s overall strategy and performance goals.
Throughout the first year of operation of this model, which began in full in April 2017, the range and breadth of issues addressed was extensive. At the Tier VI level alone, 365 unique issues were tackled, resulting in 22 systemwide safety alerts to our caregivers, organizational awareness of 15 pharmaceutical and supply shortages, rapid communication for potential formulary alternatives when supplies become limited, and better facilitation of patient transfers within the system. We also recognized and closed gaps in training on new equipment, replacement parts, new products, and instructional manuals, allowing the system to implement swift training for our caregivers.
An example of an important success of the escalation huddles is the ability to identify potential exposures to infectious diseases and quickly move to prevent the spread of diseases like pertussis, hepatitis, and chicken pox. Earlier this year, for instance, a community-wide outbreak of hepatitis b occurred. Our clinics reported the early development of the disease in huddles. That enabled Intermountain to prepare guidance for all clinics and ensure that staffing levels were appropriate and that increased dosages of needed drugs were on hand.
Another example is how the huddles allowed us to better track caregiver injuries and patient safety issues. These successes are vital within a health care system devoted to the safety and wellness of our patients and caregivers.
On the business side, the escalation process has provided improved visibility into operations. For instance, we have been able to track the increase in extended hours of access (beyond Monday to Friday; 8 AM to 5 PM) for our Medical Group clinics, including phone access and appointment availability, from 49% to 90% of clinics. We have pinpointed opportunities for improving staffing procedures and reducing interruption of services. On a national level, we have been able to work with two large vendors to improve their international shipping processes for replacement parts for imaging equipment, benefiting not only our organization but also many other customers of those companies.
Here are some lessons we have learned about how to make the huddles approach work.
It’s important to focus on trends and continually add and address issues being tracked. Every quarter we analyze what has escalated up and align it with key performance metrics. We often see significant quarterly differences — both because new needs arise and because previous efforts have improved metrics. We look at trends and how to address them, which may require adding new things to be tracked. In October, for instance, we added a new topic: errors in imaging, so that we can better understand any errors and how they occur. In reviewing trends, we have refined further the most vital metrics for executive leadership. We have also implemented a series of weekly reports in key system areas.
Accountability is vital to the efficiency of the process. Every action taken is tracked, a time frame assigned, and the resulting resolution reported back through the tiers. That accountability demonstrates the value of the process to all participants. It reveals rapid results. It shows that executive leadership is engaged daily in responding to frontline needs. Perhaps most importantly, it underscores, in practical daily terms, the organization’s commitment to continuous improvement, providing a constant reminder and tangible evidence that the commitment is real and ongoing at the highest level of management.
The entire process — from top to bottom — must be tied to the organization’s overall strategy and performance goals. That’s why Intermountain Healthcare’s four fundamentals of extraordinary care and eight key topics are covered in every day’s huddles. The eight topics are then tracked constantly and tie back to specific organizational goals.
Continuous improvement is a constant quest. Escalation huddles offer enormous potential and striking results in that pursuit — both in health care and beyond.