Memphis Small-Business Developers and Lenders Get Growth Advice from Expert

The Memphis entrepreneurial development community came together Aug. 8 to learn concepts and financial strategies that prepare small businesses for growth. About 130 lenders and small-business developers heard advice from keynote speaker, Dr. Jeffrey Cornwall, entrepreneur and director of the Center of Entrepreneurship at Belmont University in Nashville, Tenn.

Cornwall discussed financial strategies for growth, such as starting with internal sources of financing and filling in gaps with external financing sources. According to him, internal financing or “bootstrapping” makes external financing easier and can include:

• reducing overhead costs;
• identifying non-productive use of funds;
• marketing for impact vs. volume; and
• lowering employee expenses by using interns, independent contractors, etc.

He recommended using external sources for debt financing, first through community banks (which tend to be more aggressive) then through other types of lenders, such as asset-based lenders (which make loans based on company assets) and large banks. He added that later-stage growth usually requires equity investments and can be found through angel investor networks and venture capitalists.

Cornwall also advised small-business developers to assist owners in preparing financial forecasts to predict the impact of growth. He explained the importance of using a business plan to manage growth, focusing on increased profits vs. increased sales, and allowing time to digest growth to avoid problems associated with fast expansion, such as personnel and inventory issues.

For lenders, Cornwall stressed the importance of forming relationships with providers of alternative financing products and technical assistance to rapidly refer entrepreneurs to these resources when they are not prepared to obtain conventional loans. Referring them in this way helps small businesses build know-how and capacity and can eventually re-route them to conventional loans for growth. He cited that this is more productive than simply saying “no” to a loan application.

Cornwall emphasized four areas of focus that can impact an area’s overall infrastructure for small-business growth:

1. Education about the process of entrepreneurship,
2. Lower tax rates and a simple tax system,
3. Less regulation of small businesses and
4. Strong property rights.