The Deep Dive Podcast on Business Funding by Lendex Solutions Group
💰 Unlock the Secrets of Business Funding! 💡
Welcome to The Deep Dive on Business Funding, the podcast that takes you beyond the surface to explore the real strategies, challenges, and opportunities in securing capital for your business. Whether you're a startup founder, small business owner, or entrepreneur, this podcast is your go-to resource for expert insights on funding options, loan approvals, grants, investor strategies, and everything in between.
Each episode, we break down SBA loans, alternative financing, venture capital, business credit, and more, helping you make informed financial decisions that fuel your business growth. We cut through the noise, tackle common funding myths, and give you actionable steps to secure the money you need—without the headaches.
🎙️ Tune in to learn:
✔️ The pros and cons of different funding options
✔️ Insider tips to get approved faster
✔️ How to avoid costly mistakes when seeking capital
✔️ The latest trends and opportunities in business financing
If you're ready to take control of your business finances and learn how to secure funding with confidence, this is the podcast for you.
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The Deep Dive Podcast on Business Funding by Lendex Solutions Group
The Leverage Effect: Using Strategic Debt to Supercharge Business Growth
Financial leverage is a strategic tool that can amplify business growth when used correctly, not just debt as a burden. Smart, strategic borrowing becomes a superpower for your business by amplifying returns, speeding up growth, and allowing you to maintain full ownership while gaining tax advantages.
• Understanding the debt-to-equity ratio (ideally below 1.0) helps measure if you're using leverage responsibly
• Leverage works best for specific scenarios like bridging working capital gaps, funding expansion, or increasing efficiency
• A dental practice example showed how leverage turned a 10% return into a 40% return through strategic expansion
• Different financing options serve different needs: lines of credit for flexibility, term loans for major purchases, SBA loans for those who might not qualify conventionally
• Conducting thorough ROI analysis before borrowing ensures the debt will generate sufficient returns
• Managing leverage requires disciplined tracking, comparing results to projections, and monitoring cash runway
Ready to see what your business qualifies for with no hard credit pull or upfront fees? Visit biteme.ai/lendix-preapproval to find out in about 60 seconds.
#SmartBusinessFunding #FinancialLeverage #BusinessGrowthTips #EntrepreneurFinance #ROIstrategy #DebtToLeverage #SmallBusinessTips
#BusinessLoans101 #FundingWithoutFees #ScaleWithStrategy
So have you ever been there? You're running your small business. You've got these amazing ideas, big plans for growth, right, but the bank account it feels like it's always just stretched a bit too thin.
Speaker 2:Yeah, that's a feeling a lot of business owners know well. It's almost universal.
Speaker 1:Exactly Right. But what if I told you the key isn't just having more money, but maybe using capital in a smarter way? There's this tool financial leverage. Leverage that often gets a bad rap.
Speaker 2:People just think debt that's a really critical point to start with. Today we are doing a deep dive into financial leverage and yeah, if that word leverage just makes you think of, you know, scary loans and risk, let's try and shift that perspective, because this isn't about just borrowing money recklessly. It's about understanding how smart, strategic borrowing can actually become a kind of superpower for your business.
Speaker 1:A superpower. I like that.
Speaker 2:Yeah, amplifying returns, speeding up growth in ways maybe you haven't even considered.
Speaker 1:All right. So our mission today, in this deep dive, is really to give you, the business owner listening, a kind of roadmap. How do you turn those feelings of limitation into well, real growth?
Speaker 2:We're going to unpack what financial leverage actually is. Look at how you can strategically apply it, figure out how to manage it without getting into trouble, and help you see when and how it fits your specific business goals.
Speaker 1:Think of this as maybe a shortcut right, Getting you the essential info on expanding your business without feeling totally overwhelmed by financial jargon. You should feel empowered after this.
Speaker 2:Okay, let's dive in then. What is financial leverage Fundamentally? Forget the scary connotations for a second. Think of it more like a lever and a fulcrum in physics. At its core, it's using borrowed money yeah, that's the debt part but using it to increase the potential return on your own money, your own investment. It's about making your capital work harder for you.
Speaker 1:Right. So it's not just debt as a burden, it's debt as a tool to amplify what you already have.
Speaker 2:Precisely. It ties right into that old saying you know you have to spend money to make money.
Speaker 1:Leverage lets you do that, saying you know you have to spend money to make money. Leverage lets you do that. It lets you invest in those big growth moves, maybe expanding your space, buying another company, getting new tech without and this is key without draining all your cash reserves.
Speaker 2:That's a huge point and unlike, say, getting equity investors, where you're selling off parts of your company.
Speaker 1:Right With debt financing. You keep full ownership, you keep control, Plus there's a nice little bonus. People often miss the interest you pay on that debt. It's usually tax deductible.
Speaker 2:Oh, interesting. So that actually lowers the real cost of borrowing.
Speaker 1:Exactly. It gives debt a financial edge that equity financing doesn't have in that specific way.
Speaker 2:And you mentioned predictability earlier Having a set repayment schedule that can actually make managing cash flow clearer. Maybe it can, yeah.
Speaker 1:It forces a certain discipline. But OK, if we're using debt strategically, how do we measure if we're doing it right? How much is too much? Is there a metric?
Speaker 2:Yeah, how do we gauge that?
Speaker 1:There is and it's a really important one the financial leverage ratio. You might also hear it called the debt to equity ratio.
Speaker 2:Debt to equity. It sounds fancy, but the calculation is pretty straightforward. You just take your total debt everything you owe and divide it by your shareholder's equity, the owner's stake in the company Got it. Our sources mentioned a hypothetical company, scrifty. Let's say they had $110,000 in total debt, like accounts, payable loans etc. And they had $200,000 in owner's equity.
Speaker 1:Okay, so $110,000 divided by $200,000.
Speaker 2:Comes out to $0.55.
Speaker 1:Right, and what does that $0.55 tell us? Is that good, bad?
Speaker 2:That's generally considered pretty good, Really solid actually. It tells lenders, investors, anyone looking at the books, that Scrifty is using debt but they're not overly reliant on it. There's more equity backing the business than debt.
Speaker 1:So less than one is the target zone.
Speaker 2:Yeah, generally speaking, a ratio under one is seen as healthy. Once you get above one, it means you have more debt than equity and the business starts looking riskier to outsiders. So keeping it below one, like Scrifty's 0.55, definitely helps when you need more funding later.
Speaker 1:Okay, that makes sense. So leverage can be powerful. The ratio helps us measure it. Now let's get really practical For the small business owner listening when does taking on debt stop being, you know, just a scary thought and become a smart, strategic move?
Speaker 2:Right. When is it necessary? Often, it boils down to a few key situations where debt really acts like fuel for the fire. A super common one is bridging working capital gaps.
Speaker 1:Okay, like what?
Speaker 2:Well, imagine you land a huge new client Awesome right. But maybe you need to buy a ton of inventory up front or hire temporary staff and you won't get paid by the client for, say, 60 or 90 days.
Speaker 1:Ah, the classic cash flow crunch.
Speaker 2:Exactly. A working capital line of credit is perfect for that. It bridges that gap so you can pay your suppliers, make payroll and keep things running smoothly until the client's payment comes in.
Speaker 1:That makes sense. What about bigger picture stuff like actual expansion? Is it always about like buying a bigger building?
Speaker 2:Not necessarily, though that's definitely one use case. Expansion can mean lots of things. It could be investing in new, more efficient equipment, maybe automating part of your process Right. It could be acquiring a competitor or a complementary business, or even investing in a big software upgrade like an ERP system to manage everything better. Those things often require significant capital up front.
Speaker 1:And maybe buying out a partner.
Speaker 2:That too. Funding a business transition like a partial owner buyout often needs external financing.
Speaker 1:Let's make this real. Our sources had a great example Sally the dentist.
Speaker 2:Ah yes, Sally's story is a perfect illustration. She had a small 2,000 square foot office and she was totally outgrowing it. She needed to expand.
Speaker 1:And she had options right.
Speaker 2:Two main paths. Option A use $200,000 of her own cash to buy a 5,000 square foot office. The projections showed that would likely generate about $20,000 in profit.
Speaker 1:Pretty straightforward, okay. What was option B?
Speaker 2:Option B was the leveraged approach. She used only $100,000 of her own cash, then borrowed $600,000 from the bank, let's say at 5% interest, to buy a much larger, 10,000 square foot office.
Speaker 1:Wow, much bigger leap. How did that turn out?
Speaker 2:Well, that bigger space allowed for more chairs, more services, maybe bringing in specialists, and it resulted in a $40,000 profit for Sally $40,000.
Speaker 1:So double the profit of option A.
Speaker 2:Exactly. But here's the kicker. Think about her return on her investment. In option A, she invested $200K and got $20K profit. That's a 10% return. In option B, she only invested $100 of her own money and got $40K profit. That's a 40% return on her cash.
Speaker 1:That's huge. The leverage totally amplified her return.
Speaker 2:Massively. It shows how even borrowing amounts like $50K, $100 or even more, when used smartly, can generate much higher returns than just using your own limited cash.
Speaker 1:Any other quick examples?
Speaker 2:Yeah, there was one about a small manufacturer. They made high-end wedding bands using get this meteorite fragments Very niche, very expensive material.
Speaker 1:Oh, okay.
Speaker 2:They took out a loan, maybe in that $50K $100K range, to buy a new precision cutter. This thing dramatically reduced material waste, paid for itself in under a year, basically doubled the amount of usable meteorite they got from each piece. Huge boost to their product margins.
Speaker 1:So that's using debt for efficiency gains, which leads to profit.
Speaker 2:Exactly, and it's not just physical stuff. Another company used debt to double their marketing budget. They ran these pre-roll video ads.
Speaker 1:OK, Risky maybe.
Speaker 2:Well, they tracked it carefully and for every $1 they spent on those ads, they generated $3 in return, expanded their brand, got more customers. That's using debt directly for revenue generation.
Speaker 1:So it really is versatile. Retailers using it for inventory, restaurants for new locations or kitchens service businesses, maybe hiring more people.
Speaker 2:Precisely Manufacturers buying property to build equity and control costs. Each industry finds ways to use leverage strategically.
Speaker 1:Okay. So if you're convinced that strategic debt might be right, you quickly realize debt isn't just one thing. There are all these different types of financing out there. How do you choose the right one?
Speaker 2:That's a great question, because using the wrong tool can cause problems. It really depends on what you need the money for and how you need to access it.
Speaker 1:So what are some common tools?
Speaker 2:Well, for ongoing flexibility, day-to-day stuff, a business line of credit is often a go-to. Think of it like a credit card for your business, but usually with a higher limit and maybe better REITs.
Speaker 1:Revolving right, you draw pay back, draw again.
Speaker 2:Exactly. It's ideal for managing those cash flow ups and downs. We talked about handling seasonal peaks, like buying extra inventory before the holidays or just having a safety net for unexpected costs. And the big plus you only pay interest on the amount you've actually drawn down, not the whole credit line.
Speaker 1:MARK MIRCHANDANI, that flexibility seems really useful, but what about those bigger one-off investments like Sally buying the building or the manufacturer buying the cutter?
Speaker 2:SARAH BALDWIN. For those kinds of large, specific purchases with a longer lifespan, a business term loan is more typical. You get a lump sum of cash up front and you pay it back in regular installments over a set period could be a few years, could be longer for real estate.
Speaker 1:So more structured, predictable payments.
Speaker 2:Right, Better suited for financing assets like major equipment, property or even buying another business. It has a clear start and end date for repayment.
Speaker 1:What about smaller needs, like maybe just a few thousand dollars?
Speaker 2:Business credit cards can fill that gap, especially for needs under, say, $5,000. They can be easier to qualify for, especially for newer businesses, and using them responsibly is a great way to start building your business credit history. Many card issuers report to the business credit bureaus.
Speaker 1:Okay, and then there are SBA loans. We hear about those a lot. Small business administration.
Speaker 2:Yes, sba loans are a huge resource. They aren't direct loans from the government, but the SBA guarantees a portion of the loan made by a partner lender, like a bank.
Speaker 1:Which makes the bank more willing to lend.
Speaker 2:Exactly. It reduces the bank's risk, so they're often available to businesses that might not quite qualify for a conventional bank loan. They often come with benefits like longer repayment terms and sometimes lower down payments.
Speaker 1:Are there different kinds?
Speaker 2:Oh yeah, there are several programs. Two common ones are SBA Express Loans, which go up to $350,000 and are often used for working capital or expansion, and are often used for working capital or expansion, and the flagship SBA 7A loan program, which can go up to $5 million for bigger things like major acquisitions, startup costs or buying commercial real estate.
Speaker 1:Gotcha.
Speaker 2:I also saw net 30 accounts mentioned. That sounds different. It is. Yeah, it's actually a form of trade credit, not a loan in the traditional sense. It's basically getting terms from your suppliers.
Speaker 1:Like buy now, pay in 30 days.
Speaker 2:Exactly. You get supplies or inventory and the vendor gives you 30 days, or sometimes 60 or 90, to pay the invoice. If that vendor reports your payment history to the business credit bureaus and many do it's a fantastic, often easy way to start building your business credit profile, establishing those trade lines lenders look for. Often they don't even check your personal credit.
Speaker 1:Simple but effective. Any others worth a quick mention.
Speaker 2:Well, you sometimes hear about merchant cash advances or MCAs. These aren't loans either. They're an advance based on your future credit card sales. Repayment is typically a percentage of daily sales. Can be quick funding, but often very expensive.
Speaker 1:Okay, good to know.
Speaker 2:And invoice financing or factoring, where you essentially sell your unpaid invoices to a company at a discount to get cash faster.
Speaker 1:Again serves a purpose, but you need to understand the costs. Wow Okay, so lots of options. It really underlines that leverage can be a superpower, but like any superpower, you've got to handle it responsibly, right? What's the danger zone? What's the kryptonite here?
Speaker 2:Over leverage. That's the big one Taking on too much debt, especially relative to your equity or your ability to generate cash flow.
Speaker 1:What happens then?
Speaker 2:Well, it puts a huge strain on your balance sheet, makes it harder to borrow more if you need to, or to invest in new opportunities. Those fixed loan payments, they don't care if you had a slow month. You opportunities those fixed loan payments, they don't care if you had a slow month, you have to make them which can crush your cash flow if sales dip unexpectedly.
Speaker 2:Yeah, that sounds stressful, it is, and in a worst case scenario, especially for smaller businesses without deep pockets, you could risk losing control, defaulting, maybe even losing assets you pledged as collateral. And don't forget if you borrowed against an asset, say equipment, that asset could depreciate, making the situation worse.
Speaker 1:OK, so managing this wisely is paramount. The sources really hammered on. Roi analysis, return on investment yeah, how vital is that before you even take out a loan.
Speaker 2:It's absolutely critical. Roi shouldn't be an afterthought. It should be part of the decision making process. Before you borrow, it's your financial justification for taking on the debt.
Speaker 1:And the formula is Help me remember.
Speaker 2:Pretty simple. You take the net profit you expect from the investment the loan is funding. Subtract the total cost of that investment, which includes the loan principal, all the interest, any fees, then divide that result by the cost of the investment. Multiply by 100 to get your percentage ROI.
Speaker 1:Why is going through that exercise so important?
Speaker 2:Several reasons. One, it forces you to think clearly about how this loan will actually make you money, preventing you from borrowing for things that won't generate a return. Two, it helps you compare different opportunities. Which investment gives the best bang for the buck?
Speaker 1:Right Prioritization Exactly.
Speaker 2:And three. Walking into a lender's office with a well-thought-out ROI projection shows you've done your homework. It builds confidence and seriously improves your chances of getting approved.
Speaker 1:So we need to track things like potential revenue growth from the investment, any cost savings it might create, impact on profit margins and payback period how long until the investment pays for itself.
Speaker 2:Yes, payback period is huge. How quickly will the cash flow generated by this investment cover the initial loan amount? Shorter is generally better, less risk, faster path to actual profit.
Speaker 1:Okay, so, beyond the initial ROI calculation, what are the key strategies for managing the debt once you have it?
Speaker 2:First, stick to the plan. That loan was approved for a specific purpose tied to your business plan and those ROI projections. Don't let the funds leak into non-essential expenses. Use that initial use of funds outline as your guide.
Speaker 1:Keep it focused.
Speaker 2:Absolutely. Second, and this one's really important, but often overlooked regularly compare your actual results to your financial forecast, Like every single month You're adjusting to actuals, right? Exactly See how your sales costs and profits are tracking against what you predicted when you took out the loan. There is a great analogy from a CEO, Peter Gregory, in our sources.
Speaker 1:Oh yeah.
Speaker 2:He said tracking your financials is like cleaning the shower If you do it often, it's no big deal. Wait a year to do it and you're going to have to hire a contractor to come rip out your shower.
Speaker 1:Huh, that's vivid, but it makes sense. Catch deviations early.
Speaker 2:Precisely If sales are lower than expected. You see it early and can adjust spending or strategy before you run into a cash flow crisis. If they're high or great, maybe you can pay down debt faster or reinvest.
Speaker 1:What else Monitor cash runway?
Speaker 2:Definitely Know your burn rate, how quickly you're spending cash and project how long your current funds will last. You need milestones for when the investment needs to start generating positive cash flow. Also, keep your financial statements up to date, not just for taxes, but for internal management and future lenders. They want to see current performance and realistic projections.
Speaker 1:And managing your credit score is obviously key.
Speaker 2:Both business and personal, Often Pay everything on time. Even being a few days late on a business loan or credit card can get reported and ding your score. And a really crucial point if the current funding isn't working, if it's not driving the expected growth, don't just jump into more debt.
Speaker 1:Right Pause and reassess.
Speaker 2:Focus on cutting costs, improving efficiency, figuring out why the plan isn't working before you dig a deeper hole by adding more leverage.
Speaker 1:And finally talk to people.
Speaker 2:Yes, don't try to figure all this out alone. Talk to your banker, your accountant, a financial advisor, before making any big borrowing decisions. Get expert input tailored to your specific situation. It's almost always worth it.
Speaker 1:This has been incredibly clarifying. So financial leverage, it's not the monster under the bed. When you understand it, when you manage it strategically, it really isn't just debt.
Speaker 2:It's a tool, A powerful tool yeah, an enabler for growth, acquiring assets, expanding your operations, boosting your profitability. It can help with all of that.
Speaker 1:The key seemed to be clarity on your goals, tracking performance relentlessly and picking the right type of financing for the job. Do that, and the loan really can pay off.
Speaker 2:Absolutely. It transforms from a potential burden into a strategic growth engine.
Speaker 1:Okay. So if this conversation has got you thinking, maybe wondering what kind of strategic funding your business might actually qualify for, well, there's a quick way to get an idea. If you're ready to see exactly what your business qualifies for, with no hard credit pull, no upfront fees and absolutely no pressure, just go to httpsbitemealendixpreapproval.
Speaker 2:That sounds like a useful first step.
Speaker 1:Yeah, they say it takes about 60 seconds. It could genuinely open your eyes to possibilities, maybe change everything. So that's httpsbeatemail Linux pre-approval.
Speaker 2:You know it's interesting, A lot of new entrepreneurs they get that initial startup funding and they think, okay, that's it, I'm funded.
Speaker 1:Right.
Speaker 2:One and done. But, as we've really dug into today, funding isn't usually a one-time event. It's often cyclical, it's part of the ongoing growth process. So maybe the real superpower of financial leverage isn't just getting it. Maybe it's how well you demonstrate you can use it effectively, because proving that that opens the door to even bigger opportunities down the road makes you wonder, doesn't it, what new opportunity could managing leverage well unlock for your business. Next,