The Real Reason Why Small Businesses Can’t Get Approved for a Loan

Oh no, not again. Yes, that’s right, I’m not going to go there… at least not for today. There’s no shortage of excuses and reasons why small businesses can’t get approved for business loans. It never fails to amaze me the coverage this topic gets especially when the national economy goes into recession or when major political races are at stake. Yes, I agree that small business growth and success is the economic back bone of the US and also, that more than 60% of the US workforce are employed by small businesses. But where I get off the group think is when it comes to the lack of financing for a small business with a business loan. In this article, let’s explore the REAL REASON that small business don’t qualify for loans and the truth may even surprise you.It’s Deeper Than Statistics
I love numbers and even better, I love reading financial statements and the notes. The love for numbers did not become a passion for me in the world of small business lending until I came to understand that the financial statements tell the story of a business. Similar to the story behind the financial statements, there’s a story behind the statistics stating that small business owners can’t get approved for loans especially if they’re of a certain ethnic group, gender, and / or industry. I’m not completely washing away the reality that there’s a shred of discrimination in our world… hey, we live in a broken society with broken people. However, a large part of this thinking (small business owners can’t get a loan because of skin color, gender, etc) is just simply untrue. I’ve been on both sides of the fence so to speak in the world of small business lending. I’ve worked for a big bank, and I’ve worked for a not for profit community development financial institution and it’s always the same. The number one reason why small business can’t (and don’t) get approved for loans is due to the considerably large operating risk that exists in these businesses.Operating Risk: It All Starts with You
What does operating risk mean? Well, here’s a question to bring some clarity. What speaks more to sustainability: a business that’s been operating for at least one year or a business that’s still in the owner(s) mind? I’d go with the first option. Operating risk means that you have and continue to execute on your business plan(s) and that the business is cash flow positive (i.e. returning a sustainable profit margin to cover costs and make you money). Here’s the sad truth: not many small businesses get to this point. Most if any, within two years are still trying to figure things out. OK, granted, there are levels to this particularly when you observe the diversity of businesses. However, I’m speaking to the ones that endeavor to obtain a business loan.In closing, I offer a couple of ways to minimize your operating risk and increase your chances of getting approved for a loan. (1) Grow tough skin and learn to survive. The game of business is one of survival. Most days, things will not go your way and you just have to stay the course, be adaptable, and stay true to the business mission. (2) Never forget the 3 P’s – Production, Processes, and Personnel. Become efficient in the production of what you offer for sale, create and put in place processes to enhance production efficiency and ultimately the customer experience, and finally, hire, train, and invest in people who share your vision for the business.

Maslow on My Mind: How Maslow’s Hierarchy of Needs Affects Business and Society

Introduction: Maslow in the Big AppleAbraham Maslow was born in New York in 1908 to poor, uneducated Russian immigrants. He was the oldest of seven children, and therefore pushed by his parents to succeed in education where they had not. Originally studying to be a lawyer, he found it to be of little interest and eventually shifted over to psychology where he excelled. Maslow went on to receive his PhD in Psychology at the University of Wisconsin, under the tutelage of Harry Harlow, famous for experimentation with rhesus monkeys and attachment behavior. After some time he returned to New York and began studying human sexuality. In addition to this study, during the years of teaching, he had the opportunity to meet many well-respected psychologists which further helped to shape his thoughts on the human needs. The final event which led Maslow to move in the humanistic direction came from the study of the development of the concept of “self-actualization”. It was this study that led Maslow to develop his famous Hierarchy of Needs Theory.[1]Food for thought: What humans really needUntil Maslow began to develop his theories, most studies on human nature focused on biology, achievement or power to explain the forces that drive us.Maslow postulated that there were five levels of basic needs that every human attempts to attain:
Externally-Satisfied Needs (basic needs that every individual must satisfy before they can progress).1. Physiological – I’m hungry.2. Safety – I’m scared.Internally-Satisfied Needs (needs leading to enlightenment and understanding.3. Social – I’m lonely.4. Esteem – I can’t.5. Self Actualization – I can!In the 1970s, Maslow further split this hierarchy up into a total of eight levels:[2]1) Physiological: hunger, thirst, bodily comforts, etc.;2) Safety/security: out of danger;3) Belonging and Love: affiliate with others, be accepted; and4) Esteem: to achieve, be competent, gain approval and recognition.5) Cognitive: to know, to understand, and explore; (new)6) Aesthetic: symmetry, order, and beauty; (new)7) Self-actualization: to find self-fulfillment and realize one’s potential; and8) Self-transcendence: to connect to something beyond the ego or to help others find self-fulfillment and realize their potential. (new) (This concept is relatively new and many authors such as Dr. Stephen covey express similar views.)[3]Another way to look at the Needs is to break it into “D-Needs” (Deficiency) and “B-Needs” (Being). Maslow believed that the deficiency needs, once satisfied ceased to be a driving force for the individual, and they were then free to move upward to developing themselves.If we follow the traditional hierarchical form, we can see that each need forms the basis of the next need above it in the pyramid. Without these previous foundations, Maslow believed that it is impossible to move on to the next stage in the hierarchy.[4]In spite of the fact that it is very well-known and intrinsically comforting, there seems to be little hard evidence that the theory actually applies to people in general. Even Maslow admitted to this.[5]A learning experienceMaslow’s Hierarchy of Needs has had a dramatic influence on the field of education. Traditional beliefs regarding educational methodology have shifted to a more humanistic approach, with the focus on meeting the students’ basic needs in order to assist them to progress.The most important goal in education is to learn, followed by developing an understanding of the material to retain it, and apply it in life. In order to do this, the students need to be motivated enough to work hard to achieve this goal. Without motivation to learn it is unlikely that the education will succeed to the extent that it is intended.In order to maximize this motivational desire, the educators need to attend to the needs of the student. By understanding Maslow’s Hierarchy of Needs, teachers can work toward realizing the basic needs that develop the foundation for higher learning, or actualization.Here is an example of how the school can meet the basic needs of the students:If the school understands that in order to function at school, students need the basic physiological needs satisfied before they can absorb their studies, they may consider providing lunches if a great deal of the students do not have their own. This would then propel the learners to the next level. By fostering a trusting, safe environment, with a classroom social network, and providing praise in the form of positive reinforcement from the teachers, the students will be able to focus on their learning.[6]A real example that has come up near the end of the 20th century with respect to this is the problems that have arisen due to the beliefs on “special education”. During the 70s and 80s when where the traditional beliefs of segregating children with special needs (physical, intellectual, or emotional) was employed in the school system anomalies arose that called into question these beliefs. It was believed that by placing these students in separate learning atmospheres they would be able to learn at a pace more appropriate to their abilities, receive special attention and eventually progress through the system to receive the same education at the end of the program. As it turns out, this did not happen and the children’s learning was hampered.[7]Managing expectationsFocusing on such human needs for successful motivation can very easily be ported over to the business world and applied in the field of Management. In fact, Maslow himself became fascinated with the field of management and attempted to explain the ability of good managers to motivate their employees using a solid understanding of the Hierarch of Needs. He even went so far as to regularly visit a high-tech company in California to study the management practices in the 1960s. Maslow discovered that managers who treat their subordinates with trust and respect created an environment that promoted a better work situation and improved productivity.Peter Drucker, the famous management guru has said that “Maslow’s contribution to management was a big one. He pointed out hat you have to have different personnel policies for different people in different situations for them to be truly effective.”[8]Why ‘Y’?Theories X and Y, as developed by Douglas McGregor fit very nicely into the Needs Theory. If humans are intrinsically searching for something to help propel them to the next level, and have an internal desire to progress, and give back to society, as is believed by the followers of “Theory Y”, then it goes to reason that the humanistic approach, as laid out by Maslow would assist these individuals in reaching their goals. If we believe that human nature responds best to a positive, nurturing atmosphere, then managers that hold the following beliefs with respect to their staff should be able to raise them up higher in an attempt to improve productivity, and the individual goals of the worker:1. Employees view work as natural.2. Commitment to goals leads to self-direction and self-control.3. People will look for situations where they can receive accountability for their work.4. Decision-making on various levels can be spread among the company and not be the sole responsibility of upper management.[9]What’s ‘Humanism’ got to do, got to do with it?Humanism is the “third force” in psychology, following the traditional studies of behaviorism and psychoanalysis. Maslow, Carl Rogers, Rolly May and many others helped to advance this way of looking at the human condition.Humanism has a long history going back to the times of the Greek philosophers of the 6th century BC. It has come forward in time and developed into three broad categories: religious, secular, educational humanism. When people discuss “humanism” they generally mean the understanding of secular humanism.
“Humanism is a broad category of active ethical philosophies that affirm the dignity and worth of all people, based on the ability to determine right and wrong by appeal to universal human qualities— particularly rationality, common history, experience, and belief. Humanism is a component of a variety of more specific philosophical systems, and is also incorporated into some religious schools of thought.Humanism entails a commitment to the search for truth and morality through human means in support of human interests. In focusing on the capacity for self-determination, humanism rejects transcendental justifications, such as a dependence on faith, the supernatural or divinely revealed texts. Humanists endorse universal morality based on the commonality of human nature, suggesting that solutions to our social and cultural problems cannot be parochial.”[10]Humanists generally believe the following:[11]1. Humanism is a philosophy focused upon human means for comprehending reality. Humanists make no claims to possess or have access to supposed transcendent knowledge.2. Humanism is a philosophy of reason and science in the pursuit of knowledge. Therefore, when it comes to the question of the most valid means for acquiring knowledge of the world, Humanists reject arbitrary faith, authority, revelation, and altered states of consciousness.3. Humanism is a philosophy of imagination. Humanists recognize that intuitive feelings, hunches, speculation, flashes of inspiration, emotion, altered states of consciousness, and even religious experience, while not valid means to acquire knowledge, remain useful sources of ideas that can lead us to new ways of looking at the world. These ideas, after they have been assessed rationally for their usefulness, can then be put to work, often as alternate approaches for solving problems.4. Humanism is a philosophy for the here and now. Humanists regard human values as making sense only in the context of human life rather than in the promise of a supposed life after death.5. Humanism is a philosophy of compassion. Humanist ethics is solely concerned with meeting human needs and answering human problems–for both the individual and society–and devotes no attention to the satisfaction of the desires of supposed theological entities.6. Humanism is a realistic philosophy. Humanists recognize the existence of moral dilemmas and the need for careful consideration of immediate and future consequences in moral decision making.7. Humanism is in tune with the science of today. Humanists therefore recognize that we live in a natural universe of great size and age that we evolved on this planet over a long period of time, that there is no compelling evidence for a separable “soul,” and that human beings have certain built-in needs that effectively form the basis for any human-oriented value system.8. Humanism is in tune with today’s enlightened social thought. Humanists are committed to civil liberties, human rights, church-state separation, the extension of participatory democracy not only in government but in the workplace and education, an expansion of global consciousness and exchange of products and ideas internationally, and an open-ended approach to solving social problems, an approach that allows for the testing of new alternatives.9. Humanism is in tune with new technological developments. Humanists are willing to take part in emerging scientific and technological discoveries in order to exercise their moral influence on these revolutions as they come about, especially in the interest of protecting the environment.10. Humanism is, in sum, a philosophy for those in love with life. Humanists take responsibility for their own lives and relish the adventure of being part of new discoveries, seeking new knowledge, exploring new options. Instead of finding solace in prefabricated answers to the great questions of life, Humanists enjoy the open-endedness of a quest and the freedom of discovery that this entails.What is holding us back?If reaching the summit of the mountain of self-actualization were easy, everyone would be enlightened, happy, hard-working, creative, and wealthy. We would all strive to take responsibility for our actions, and attempt to improve the situation around us by developing new and unique ideas. Unfortunately, this is not happening. What is holding us back from reaching our “fully functional, healthy personality”?I concur with Maslow that society and the education system are preventing individuals from reaching their full potential. Here is what Maslow has to say on the matter:”The state of being without a system of values is psychopathogenic, we are learning. The human being needs a framework of values, a philosophy of life, a religion or religion-surrogate to live by and understand by, in about the same sense he needs sunlight, calcium or love. This I have called the “cognitive need to understand.” The value- illnesses which result from valuelessness are called variously anhedonia, anomie, apathy, amorality, hopelessness, cynicism, etc., and can become somatic illness as well. Historically, we are in a value interregnum in which all externally given value systems have proven failures (political, economic, religious, etc.) e.g., nothing is worth dying for. What man needs but doesn’t have, he seeks for unceasingly, and he becomes dangerously ready to jump at any hope, good or bad. The cure for this disease is obvious. We need a validated, usable system of human values that we can believe in and devote ourselves to (be willing to die for), because they are true rather than because we are exhorted to “believe and have faith.” Such an empirically based Weltanschauung seems now to be a real possibility, at least in theoretical outline.” [12]If society is not instilling the proper values into the youth of today, they are unable to develop a healthy outlook on life. This will hamper their journey to self-actualization. The education system is also currently not providing the proper morals, and positive, nurturing environment for students in order for them to grow. The schools need to focus on the areas of Maslow’s Hierarchy of Needs that are deficient in the student body, nurture them, and help their students to excel in ways that go deeper than just good grades.Summary: Change Your Socks, Change Your AttitudeIn the contemporary business world, a product-centered business style is no longer successful. Companies must now, more than ever before, develop a consumer-centric approach to business. The market is demassifying, and this means that individual needs must be met.In order for the education system to produce individuals that can reach the peak of Maslow’s pyramid, the schools should also take a similar approach and rather than focus on the product (education), they should instead focus on meeting the needs of the client (student). This will by no means be an easy task for it requires a tremendous amount of time and energy on the part of the supplier (schools), but the end results will produce a much more satisfied customer who is able to benefit from the interaction.Maslow lists 10 points that educators and teachers ought to consider in order to change their style so as to move toward the self-actualization of the individual. A summary of these points can be found below:1. Be true to yourself.2. Do not be bound by your culture.3. Discover your calling.4. Life is precious.5. Do not judge people.6. See to the satisfaction of basic needs.7. Take time to smell the roses.8. Learn self-control.9. Don’t sweat the little things.10. Make the right decisions.These can and should be applied to all aspects of life, from your private time, through education and even in the work environment in order to work toward improving yourself and society.References1. C. George Boeree, ‘Abraham Maslow, 1908-1970’, http://www.ship.edu/~cgboeree/maslow.html2. Huitt, W. (2004). Maslow’s hierarchy of needs. Educational Psychology Interactive. Valdosta, GA: Valdosta State University. Retrieved [date] from, http://chiron.valdosta.edu/whuitt/col/regsys/maslow.html.3. Stephen R. Covey, ‘The 8th Habit, From Effectiveness to Greatness’, FranklinCovey Co., Free Press, 2004.4. Wikipedia, ‘Maslow’s Hierarchy of Needs’, http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs5. Educational Psychology Interactive6. Jones, Michael. “Maslow’s Hierarchy of Needs Can Lower Recidivism.” Corrections Today 66.4 (2004): 18–22.7. Norman Kunc, ‘The Need to Belong: Rediscovering Maslow’s Hierarchy of Needs’, Axis Consultation and Training Ltd,, [http://www.normemma.com/armaslow.htm], 1998.8. Excerpted from Maslow on Management, by Abraham H. Maslow, with Deborah Stephens and Gary Heil, 1998.9. Robbins, Stephen P., ‘Essentials of organizational behavior, eighth edition’, Pearson Education Inc., 2005, p5010. Wikipedia definition for ‘humanism’, http://en.wikipedia.org/wiki/Humanism11. Frederick Edwards, ‘What is Humanism?’, American Humanist Association, 1989, [http://www.jcn.com/humanism.php4]12. Maslow, A., & Lowery, R. (Ed.). (1998). ‘Toward a psychology of being (3rd ed.)’, New York: Wiley & Sons.

But I Don’t Know How to Network With People!

At a recent event, someone I hadn’t met before came up to me and asked me for advice on how to network. I was flattered that the person asked me and puzzled at the same time. I asked him why he wanted my advice. He told me that he was observing me and noticed how easy it seemed for me to meet people and start a conversation with them. He also mentioned that I looked calm, relaxed and sincerely interested in the person I was speaking with. That last comment caught my attention and is something I hear a lot.Have you ever had a conversation with someone who you could tell was not interested in what you did or what you were saying? They might have even come up to you, introduced themselves to you first, and started the conversation.Unfortunately, I’ve experienced that very scenario far too often. The person who asked me the networking advice apparently didn’t understand that in order to best network with others, one must sincerely be interested in the person they’re networking with. It’s been my experience that people for the most part can tell when someone is not really interested in them.My first thought after his comment was “Of course I’m interested in the person I’m speaking with!” and I wanted to say that but I didn’t. What I did do was ask him why he wanted to get advice on how to network. He told me he wanted to get to know people and have people get to know him, but he felt uncomfortable going up to someone and introducing himself. I told him that’s a fair feeling to have if you’re not use to networking. The way to help get over that feeling is to simply start doing it. Going up to people and introducing yourself, but remember a few important points:
Be Yourself – First and foremost. Don’t try to be something you don’t truly believe you are. I’ve always liked being informal and in most networking scenarios, being informal is the way to go. Remember that people who you want to network with, and eventually surround yourself with, will want to know the real you. People who like you and will want to do business with you because of who you are. One thing I see that really helps a lot of people in networking, including myself, is choosing to have an outgoing and friendly attitude. People don’t always remember what you say, but they will most likely remember how you make them feel.

Breathe – Take a slow deep breath and slow exhale. More than once if you want. It will help you relax before you join a conversation or start a conversation with people you don’t know.

Know Your Audience / Know Where You Are – The reason I say this is that there are many different types of environments where you can network with others. Are you networking at a conference, at a party with neighbors, at a function for work? Many environments are formal, while others are very informal. An example of a formal environment may be at a business gala during the reception portion of the event, while an informal environment may be a sporting event. You don’t want to network at a party with neighbors the same way you would network at a conference representing your company or service.

Look People in the Eye – When speaking with someone, remember that looking them in the eye when they are speaking to you, as well as when you are speaking to them, is considered polite. Not looking someone in the eye when they are speaking to you makes it look as though you’re not really interested in them. At the same time, not looking someone in the eyes when you are speaking to them makes it appear as though you are not being sincere. Quick Note: It’s OK to periodically take a quick glance away from the person because you don’t want to appear as though you’re simply staring at them either. :-)

Avoid Getting Tongue-Tied by Preparing a Self-Introduction – Having a self-introduction prepared that is clear, interesting, and well delivered is a very helpful tool to have in your possession when starting a conversation with someone you don’t know. How does one do that? The simplest way is to write it down. Prepare what you are going to say to someone when introducing yourself and then practice, practice, practice. The more you practice, the more it will sound natural and unscripted. What you write down will depend upon the nature of the event you’re preparing for. Regardless of what you write down or the type of event it is for, what you say about yourself shouldn’t take any longer than 8 to 10 seconds.

It’s OK to Ask Questions – When you are talking with a person you’ve met at a reception or some other kind of networking opportunity, you can ask questions to help keep the conversation going. In my networking experience, I’ve found that I sincerely enjoy learning about other people (and many people sincerely enjoy talking about themselves). When I meet someone I pay attention to what they say in order to learn something about them. For example, if a person works for a particular company, a question I always ask is, “How long have you worked with XYZ Corporation?” (Instead of XYZ Corporation, use the company they’re associated with.) Many times the next question I ask after that is, “How do you like working for them?” At that point I’ve started the conversation going with the person and most of the time, they are more than happy to speak about their experiences. You can ask any question you feel is appropriate for the situation (about them or something else).

Worried About Rejection? Don’t Be – It happens to everyone. Anyone who says they’ve never been rejected is only admitting that they’ve not tried it much if at all! There will be people who don’t respond to your introduction the way you would like. If you find yourself in that situation, don’t take it personally. Just move on. Creating and maintaining an outgoing, friendly attitude no matter how someone reacts to you will always make things easier. It also helps to have a sense of humor.

Make It a Choice to Have Fun! – As I mentioned earlier, keeping a healthy sense of humor is a key ingredient to networking. Another one is simply to relax. At many networking events, I’ve run into people who are so serious about networking. They treat networking as though it is a necessary evil that must be done in order to succeed in life. Sometimes an individual can be so serious that they alienate the very people they are attempting to network with. Unfortunately, I’ve seen that happen far too often.
Remember a cardinal rule about networking:The goal of networking is to establish a lasting working relationship with someone else.If you find yourself nervous in networking scenarios, understand you’re not the only one. Everyone has different levels of experience and expertise when it comes to networking and no one is born being good at networking. The great thing is that everyone gets better at networking the more they do it. The more you practice networking, the more you just may be surprised at how much easier it gets!