by Karen Carter
The economy will often produce business start-ups that appear and disappear overnight, and many were started based on great ideas located in thriving up and growing neighborhoods. Yet in business what today is “boom” can turn to “bust” tomorrow the reality of economics. When Infinite Hands Initiative was formed we were created on the intentions of helping women in shelters start their own home based business. The curriculum provided well explained directions for each new business owner along the path of business formation and ownership. The main goals were to instruct and provide the most up-to-date informational resources possible. That would include both positives and negatives of starting a new business and the tenacity required to operate a flourishing business while raising a family while learning to become self-sufficient. A harsh reality is the groups of ladies targeted to participate in the Entrepreneurial Workshops were far different than those starting a business with family support, financial backing or even a line of credit. Yet, some businesses succeeded and flourished and others failed, sending me to research the whys and hows of the “Boom or Bust Cycle.”
Research explained that boom or bust cycle has been around for ages and often dates back to how banks handle money (yours, mine, ours) make no difference to the banking lenders and how individuals handle money and credit. The fault cannot be placed on the shoulders of the banking institutions alone but individuals must bear a fair share of the fault for the boom or bust cycle in business. Going into a bank for a microloan, small business loan or a personal loan with the desire to start a business is one thing but going in with a well written business plan an awesome business idea and location, location, location might be the fuel for your local lender to offer more than you or your business need to start up so hold on to those emotions. How often would we jump at the offer to borrow way more than we need thinking “it will tide the business over” yet never consider how long the term over is intended? No one goes into a lending institution on the premise of paying back a larger loan than I need but to fund my business. With easy obtained credit and low interest loans they have created a receipt for business owners to overinvest. Overinvest = To invest an excessive amount.
Human emotions play into the boom or bust cycle when bankers approve a line of credit at the lowest interest rate for a loan above what you had in mind when you first step foot in the bank (proud and happy) emotions come into play and often time people believe the abundance of cash/credit is deserved and little is thought about what happens if business is slow or nonexistent. There will be a monthly note due and if we fall prey to the business boom or bust cycle it is often way too difficult to meet the monthly notes and as the next note is piled onto the previous one what was once a booming line of credit is not a very real business bust. Entrepreneurs, business owners and partnerships don’t become prey to the business boom or bust cycle, take only what your business need financially with many ideas and avenues of how the business can grow from quarter to quarter. Seeing those dollar signs have turned a many potential business owners into Chapter 7 victims. If I could share anything with you it would be learn the value of a well written business, marketing, strategic plan. Dot all your i’s and cross all your t’s, be sure your financial are on point and the numbers are correct, then have someone review your plan before presenting it to a lender and when your lender is so impressed that you are offered more than you intended to ask, just ask if they can hold it in reserve. Cover your bank and your business during the infamous boom or bust cycle.
Karen Carter, Founder and President
Infinite Hands Initiative