As I write this post, I realize a few of you may not agree with what I'm about to share, but just take a few minutes to hear me out anyway.
As the concept of telecommuting and outsourcing becomes more popular, working from home has become more accepted within the last decade. Many small business owners have literally decked out their home offices to replicate a penthouse suite on Wall Street. Many home offices are equipped with full fax, scan, and printing capabilities along with high-speed Internet and T1 lines piped right into a converted garage. They have the ability to provide all of the same services as their larger corporate competitors, but they just can't seem to secure the capital needed to take their businesses to the next level.
Why is that? Credibility...or lack thereof.
Although home-based businesses have become more accepted by the general public, banks and lenders have not followed suit. Now here's where I normally get push back and have often heard the following responses from some of our best clients:
"What's the problem, I've run my business from home for over 10 years now!"
"My business is generating over $500,000 a year in revenue and I built it all from my home office!"
"I should be able to work from home or anywhere I want as long as I'm providing high quality service to my clients, right!?"
"I started my home-based business so that I didn't have to work in a corporate environment, now I'm being penalized for working from home!"
Now I can go on and on but I think you get the picture.
First of all, I couldn't agree more with many of the concerns stated above. I'm an advocate of home business and the benefits it provides to both work and family. But here's the rub, I don't make the underwriting decisions on your business loans, the bank does.
When a bank underwrites your business loan or line of credit, they will research your address by performing a Google Earth search. This will bring up a birds eye, satellite view of your location on their computer screen. If your business address shows up as anything other than an office building or industrial park (i.e. a residence, Post Office, Mailboxes Etc., UPS Store, etc.), you could be denied financing.
I know, you probably think that's ridiculous and unfair. Why are they always picking on the little guys (and girls), right?
Well, the banks are known for managing risk and they view home-based businesses as a higher risk than more traditional business models. This is because there is a negative perception of home-based businesses in the banking community based on their potential to close shop due to the few obligations preventing them from discontinuing operations. Most banks won’t consider a loan to a home-based business, which may cause the business owner to pull out equity from their home, leverage their personal credit, or pursue alternative financing options.
So here's a quick solution that will allow you to continue to work from the comfort of your home and still secure the capitalization benefits of a traditional brick and mortar business.
Secure a virtual office...yes, a virtual office. I can hear the resistance already...
"Why would I pay good money for an office I'm not going to use?"
"I already have the post office routing my mail to my home address!"
"I can't afford office space, why do you think I'm working from home!?"
These are the primary objections I hear when it comes to virtual office space and they all have some merit. The only problem is lenders don't care what we think, their only concern is mitigating risk, increasing ROI and keeping their shareholders happy.
That said, as a small business owner, I believe you should adopt a similar philosophy.
1. Mitigate Risk. Think about it, there is certainly an inherent risk of using your home address for business purposes. Imagine having a dissatisfied customer that decides to pay you a visit at your home office and shows up at your doorstep unannounced. Or suppose you are a party to a lawsuit and the person comes after your personal assets. Now your home address is exposed to process servers, liens and other liability.
2. Increase ROI. Consider a virtual office an investment in the credibility of your business. Not only does the bank look at your business address, but more savvy clients will as well. Put your best foot forward and don't give clients a reason not to do business with you. Think about it this way, for just a couple hundred dollars, you can project the same professional image as Google, while increasing your ability to secure expansion capital in the process...now that's increasing ROI!
3. Keep Shareholders Happy. Unless you have a business partner, the only shareholder you need to keep happy is YOU. A virtual office will often increase sales from prospects that wouldn't normally do business with a home based operation. And now that the bank sees a professional corporate address, they’ll be much more willing to extend you the credit needed to increase your marketing campaigns, expand your service offerings, and grow your business...happy now!?
That said, since our clients are all over the country, I often recommend Regus virtual offices due to their ability to service our clients nationwide (over 1,800 locations in 600 cities). Due to their size, its likely Regus will have a location in your area, along with several small business packages that will fit your budget. Here are a few of their most popular packages:
1. Address Only - Receive mail and packages at your dedicated business address.
2. Virtual Office - Professional business address, dedicated phone and fax numbers, receptionist services, and part-time use of fully furnished offices and meeting rooms.
3. True Office - Your own full-time private office with receptionist services, dedicated phone and fax, Internet, full furnishings, meeting rooms, and more.
So whether you're working out of your basement, garage or a spare bedroom down the hall, a virtual office is a great way to leverage the prestige of a penthouse suite to boost your company’s image and secure the business capital you need, with minimal out of pocket expense.
About the Author Kylon J. Trower is 20+ year serial entrepreneur with a background in residential and commercial lending, business credit development and financing. Most recently, he's built a national network of financial professionals dedicated to preserving the lifeblood of our economy, the American small business sector.
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