From the February 1997 issue of Entrepreneur

Small-business owners who have never borrowed money are usually proud of that fact, but sometimes not taking out a loan can hurt you.

"Borrowing money is necessary for most growing companies. That's the way small businesses break out and become larger," says Tom Kellogg, president of Hartford, Connecticut-based Business Lenders Inc. The company, which has offices in Connecticut, Massachusetts, New Jersey, New York and Rhode Island, is one of the Northeast's most active Small Business Administration lenders.

A loan can also help companies that have problems paying bills or need to pay off creditors and improve cash flow.

When should you think about seeking a loan? Business Lenders has identified nine instances when you should consider a loan. The top three:

1. You want working capital to add employees, increase long-term sales and generally help the business grow. "Companies can grow using internally generated capital, but it might be much slower growth, and they will be exposed to risk for an extended period," says Kellogg.

2. You want to increase your market share. To carve out a larger share of the market, you may need to offer more favorable terms to customers and take on new ones who are creditworthy but slow
payers.

3. You want to take advantage of early-payment discounts. Suppliers may offer discounts on invoices paid within 10 days instead of the standard 30.

Other reasons to consider a loan are to purchase new equipment, refinance existing debt, establish a relationship with a lender, buy a commercial building or hedge against a downturn in business.

On-Site Planning

If you're confused about retirement planning, a trip online could help. Diversified Investment Advisors and Aetna Retirement Services have each created interactive Web sites to educate users about retirement savings options.

The Diversified Web site (http://www.divinvest.com) uses simple games to help users understand concepts and provides worksheets users fill out to determine risk tolerance. The worksheets use variables such as age, current income, expected retirement age and retirement goals to calculate how much money you should save annually to meet retirement needs.

The Aetna Web site (http://www.aetna.com/financial/investment) is geared toward people who already have a basic understanding of investing. It uses interactive tools to identify users' risk tolerance, then creates a sample portfolio. Aetna says the site works just as effectively for those with $100 to invest as it does for those with $100,000. Users can also analyze their current savings accounts and investments to see where changes are needed.

Border Crossing

If you're investing solely in the U.S. market, you could be taking unnecessary risks, says Paul Melton, publisher of TheOutside Analyst newsletter, which compares stocks from more than 15,000 companies in 42 countries.

"[The danger is] market risk, which is anywhere from 25 to 50 percent of total risk, and stems from the tendency of stock prices in any one market to rise and fall in unison," explains Melton. (Nonmarket risk, on the other hand, is risk inherent in the company, such as a management scandal or a drop in earnings.)

To reduce market risk's effect on your portfolio, Melton advocates investing globally, which he explains further in his new book, The Financial Times Investor's Guide to Going Global With Equities: Make Investment Gains Across Frontiers (Pitman Publishing). The book targets long-term conservative investors with a minimum time frame of three to five years.

Melton recommends you don't begin global investing until you have $250,000 to invest, but adds that those with less than that can go the mutual or closed-end fund route. His book explains those options as well as other ways of investing in foreign shares, including direct purchase through foreign stock exchanges.

Contact Sources

Aetna Retirement Services, (800) AETNA-60, (http://www.aetna.com/finmail.htm);

Business Lenders Inc., 15 Lewis St., Hartford, CT 06103, (800) 646-7689, (860) 244-9202;

Diversified Investment Advisors, (800) 770-6797;

The Outside Analyst, fax: 011-31-206738161.