Finance Your Small Business: So Much Money - So Little Time

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Finance Your Small Business: So Much Money - So Little Time

By: MaryAnn Shank

$37.) 4 million funded from venture capital today. $86.) 4 million funded yesterday. $51.) 4 million funded the day before.

These numbers are not made up. They are actual numbers from actual reported venture capital funding. I get these notices emailed to me day after day, rain or shine.

I'm not personally looking for business financing - but the entrepreneurs who read my website are. These numbers are a constant reminder to me that companies - lots of companies - are getting funded every day.

And these numbers just reflect the reported venture capital funding. There is probably double that amount from angel investment and unreported fundings, and millions more from the $16 billion pool that SBA has this year.

All in all, it's a lot of money. That's a lot of companies and banks and groups and individuals actively investing in small business.

So how come you're still looking for financing?

Perhaps you aren't presenting your company effectively.

Or perhaps you haven't located the right lender.

It's also possible that your concept just isn't very good, but I doubt that. The fact that you are reading this article means you are a serious entrepreneur, with a serious business.

So where do you go to find all these investors? Here are some starting points:

For standard business financing, talk with the local office of the Small Business Administration. It's a new agency, with new programs and services, and lots of money to lend. Although much of the focus of the SBA is on minority business enterprises, the SBA still has a lot to offer non-minority companies.

Also talk with your local banks. (That was plural "banks", not "bank".) Talking with a number of local bankers will rapidly bring into focus the wide ranging priorities of the various banks, and where your company fit in.

As for venture capital and angel investors, there are several options.

One option is to go to online sources. There are a number of online services, such as VFinance, that sell the names and addresses of possible investors. It's not expensive, perhaps $2-5 per name. The idea is that once you get the list of 200 or 2,000 names in hand that you will contact each with a written executive summary or business plan, and then wait to hear from one of them. This is a very passive approach, roughly akin to throwing paint on the wall and hoping that something will stick.

If you are like most entrepreneurs, patience is not your strong suit, so sitting and waiting for a response is not quite your cup of tea.

Another option is to go to one of the many directories of venture capital firms. These directories typically include addresses, phone numbers and emails, along with the geographical areas of interest and the types of investment that each is seeking. Most businesses can narrow down their list of prospective investors to several hundred venture capital firms this way. And again you are faced with the prospect of sending out written material for each one, and waiting for a response.

A third option is to take a more proactive approach. Identify your best prospects yourself from a number of reliable sources. Get introductions where possible. Learn everything you can about your target investors, and then go after it. Typically a phone call is the first contact, not an anonymous executive summary. Knowing that you are calling your best prospects, you know too that they are open to hearing from you. You have names, you have investment histories, you have everything in hand to make a real connection with the target investors. Then go do it.

Getting your company financed is one of the hardest things you will ever do as an entrepreneur. It can be hugely frustrating, disappointing and genuinely discouraging. But lots of entrepreneurs do it. And so can you.

No one knows when this incredible window of opportunity will close Spruce up that business plan and go for it -- now.

MaryAnn Shank


http://www.businessplanmaster.com


http://businessplanmaster.blogspot.com

About The Author

Ms. Shank is a seasoned business plan specialist, having devoted over 20 years of her career to venture capital firms and emerging companies.

(c)2005 MaryAnn Shank

This article may be reproduced only a entire entity without edits, and only if the above 2 links to Business Plan Master are included.

Comments

raindrop_110880 11.04.2011. 13:35

How to legally go about becoming partner in a friends business? I have a freind that started a business 2 years ago. This will be the first year it is actually picking up and making a little money. She wants me to become partner, and I would help her run and finance it. How do we legally go about drawing up an aggrement/contract so that if it all goes sour, neither of us gets screwed. I would like to not have to get a lawyer, this is a small business that is done out of her home. How should I handle this?

raindrop_110880

Admin 11.04.2011. 13:35

I would recommend a lawyer to ensure that you do not as you say get screwed but if that is out of the question you could try either on-line document providers or some of the large stationery suppliers. they usually have a range of contracts which come with blank areas that you fill in on a question and answer basis.
Take care, it may be a small business now but in a few years you could be talking big bucks.

Admin

Chrissy B 14.05.2007. 19:24

How can I get a small business loan? I have good credit but little cash or assetts? I am looking into buying a small business just outside of Denver, Colorado but I have no idea where to start as far as getting a loan. I have good credit but would only be able to come up with $2,000 -$3,000 up front cash. As far as assetts, I have virtually nothing. Is a business loan even an option in this situation? I need a loan for about $230,000. The business I am looking into buying is well established and very lucrative would this factor into the loan situation?

Chrissy B

Admin 14.05.2007. 19:24

The truth is that it is difficult for a startup business to borrow money as a small business loan -- especially without assets and without experience in the business.

However, if you're applying for a loan and if it is a big amount, banks and even the Small Business Administration may consider the following factors:

- A business plan explaining what the business is

- Your background and experience in the business -- in my experience, this is KEY in the eyes of the bank because they want to make sure that you know what you are doing and that you can make the business work. If you don't have any experience with the business, have someone on board that knows the business to give banks assurance that someone will guide you

- Your credit factors because it shows your dependability and how well you handle credit. They will do a credit check on you and poor credit history may be frowned upon, or even reason for the disapproval of your loan application

- Your collateral. Banks, even SBA guaranteed loans, want the borrower to show collateral. They want to be guaranteed that somewhere somehow they can get payment from you

- Condition or terms of loans. Banks would want to know three important things: "How much money are you requesting? What will it be used for? and For how long will it be needed?" Banks oftentimes prefer to approve loans for items that can be identified, has lasting value, and can be repossessed and sold if things fail.

You have a very tight situation when you only have very little money and no assets. However, I suggest you talk to your local Small Business Development Center. They may be able to give you lists of banks and financial institutions in your area who may be able to give you a loan -- even if it's not a full amount. Who knows, one of the smaller local banks would be willing to take a risk on you.

Here is an interactive map of Colorado -- click on your location to find the nearest SBDC http://www.advancecolorado.com/small-business/sbdc-map.cfm and ask for their help on how you can get the financing you need

Admin

Riley W 28.07.2009. 14:42

Starting a small business. How do I get financing? Does anyone know of a good resource for good information? I'm looking into starting a small business but apparently banks don't loan to startups and there aren't gov't grants available for startups either. How do i go about getting the financing together? Are there any good resources? I am writing the business plan now.

Riley W

Admin 28.07.2009. 14:42

The posts above are a scam.

Banks Do lend money to start ups, but it is harder now than normal and you are likely to have to shop banks to get a loan and get decent terms. Try to find on with a designated Small Business Banker. They will likely be able to help you better and have more experience than most branch managers.


It would really help to get a little more information.

(1) What kind of business are you starting?
(2) Do you have anything for collateral
(3) Is there a secondary source of income (are you still going to work is your souse or partner going to still work)?
(4) What area of the country do you live in?
(5) How much are you looking to borrow?

If you can not get bank financing there are a couple of options.

(1) Find outside investors
(2) Home equity loan
(3) Find a partner
(4) start small and work your way up.

Admin

So With Sin I Condemn You 25.07.2011. 22:15

can i use a small business microloan to pay off a high interest business truck loan? We bought this work truck with little credit and a down payment. The interest rate is around 24%!! I would like to get a small business loan to pay off this high interest debt and also purchase other machinery. What is the appropriate loan? Should I get a microloan? Or is there a better one to get? We are a concrete contractor and this is our first year in business. Thanks

So With Sin I Condemn You

Admin 25.07.2011. 22:15

It depends. Is your business incorporated or are you a sole proprietorship?

If you're not incorporated, then sure, try to apply for a business loan and use that to pay off the truck. Let the bank know that the truck will be collateral. If you're incorporated, and the truck wasn't financed with the company as the title holder, then you can't do it, because you will be mingling personal and business finances. That's a very bad thing.

What you need to do is to first see if you can refinance the truck. The only way to get such high interest, is if you had bad credit, so if your credit has improved, and your business is making money, then a bank should be willing to refinance it at a lower rate. That's the most obvious route.

By the way, banks will only give business loans if you have good credit, good cash flow, good revenue, and money to contribute. If your credit is still bad and your business is barely covering your bills, don't expect to get approved. Oh, and you need a business plan. This is why the refinance will be easier.

Admin

angVlc 31.07.2013. 18:39

Where can I get Small Business Loan with No credit check and fair rates? I have a small business in FL which does fairly well and I'm looking to get a loan for expansion. I have got approved by credit union and banks, but the interest rates are too high. Also when the banks and credit unions do credit checks, credit scores go down, I check and just because they check my credit, my score went slightly down. Please no Spam, I will check if these are legitimate companies, thanks.

angVlc

Admin 31.07.2013. 18:39

There is a great company that provides Business Loans for You could be a Corp, LLC or Sole Proprietor. The company offers a new approach to Small Business Loans in which they are revenue based. Based on your Cash Flow - because there's more to your business than a credit score. The company does NOT DO credit checks, so it wont hurt or effect your credit score if denied and you wont be denied a loan based on your credit because no credit checks are ran. The company has helped over 55,000 businesses world wide and have a 98% loan approval rate. They also have fair rates so you wont be paying high interest rates. It's also 100% free to apply.

The company offers:
A performance-based model that makes fair financing available to millions of well-run businesses that just miss the cut for traditional bank loans.
Analyzes the volume of cash flow in your business, which is a better indicator of your company?s financial health than its credit rating. This allows us to lend to businesses that would otherwise be locked out of fairly priced capital. By changing the evaluation process, the company has made it easy for you to receive loans at fair rates.
Expedited Funding in as little as 2 days with minimal paperwork and no
personal guarantee programs.
Up to $250,000 loan
Bad Credit, No Credit, does not matter, you still qualify for a loan.
You work directly with the lender, no third parties.

So in a nutshell, the company looks beyond typical bank products, loans and credit lines to find the right solution for each customer?s requirement. You many be a recent start-up, have poor personal credit, be losing money, or lack collateral, but that does not necessarily preclude them from creating a financing solution. Credit does not matter to them, it is a totally revenue based program. This program has helped thousands of businesses. If you are interested in learning more or applying visit their website: https://creditwise.infusionsoft.com/go/BTKEGCW/GetLoan/
Yahoo doesn't allow hyperlinks to be posted so you can just copy the link and paste it in your browser and it will take you directly to the website.

Admin

Aaron 01.08.2010. 06:03

Small business finance: Is it cost effective to get a small business finance loan? I run a small business on the internet. I want to expand my business a little bit, but I'm not sure of the best way to get the money that will help me with that. Would it be better to continue using the small business finance that I currently have, delaying expansion, or would it be smarter to get a small business finance loan from the bank in order to make my operations bigger now?

Aaron

Admin 01.08.2010. 06:03

Christina, from what you told us here, we cannot make a determination on what is best for your situation. You would have to give us information on the following items:

1) How much of a loan do you need to expand your business?
2) If you get that loan, how much of an increase in sales volume would you expect and what is the profit margin on those additional sales?
3) How large a loan do you presently have and at what interest rate?
4) What interest rate did the bank quote you on their loan and what are loan terms?

Admin

jbrowning001 05.03.2009. 14:21

Best way to accept credit cards for small business owner? I am starting a small business and I need to be able to accept credit cards. I have heard a lot of bad things about Pay-pal and I would like to avoid using Pay-pal. Besides, I will need to be able to just swipe a card and quickly move on to the next customer. Also, my personal credit rating is not good, and it seems like most of the options I have seen require a credit check. Does anyone have any suggestions/advice about accepting credit card payments for a small business owner without good credit?

jbrowning001

Admin 05.03.2009. 14:21

When it comes to credit card processing there are 2 way to go about this. The first is through pay-pal or a like company.These are what we call in the industry 3rd party payment processors. These types of companies are good only if you are a small company, usually from home and if you are doing under a $1000.00 a month. The pros to this can of account is that it is an easy setup and simple to use. The cons are that it is web based, you as the business owner have no real protection against chargebacks(when a customer dispute a charge) pay-pal is always going to be on the customers side and not yours. Also it takes 4-5 days to receive your money. The 2nd options is opening a merchant account. This is meant for business owners that are doing over $1000 a month. These types of account is for retail locations, over the phone orders and ecommerce. This system is very fast, run a card and within seconds the customer is either approved or decline and then on to the next one. The pros are that you are protected against chargebacks, you receive your money in1-2 days and you have complete control over you account. The cons are it may cost a little more upfront for equipment but most companies can offer inexpensive equipment or possible free. As far as credit score go, merchant services companies are just like any other finance company. Some have very strict policies and some not so strict. Working in the merchant services industry myself I know certain companies that won't touch anything under a 650. On the other hand I know of companies that have a min required score of 500. The nice thing about this is that unlike a finance company which will charge you more because of poor credit, merchant services companies do not. It is either you are approved or not, but you still receive the same price(% rate) regardless of credit score. The last thing is, it also depends on what type of business you have (restaurant, gas station, hair salon, etc) certain companies have an automatic approval policy based simple on the business type. Which means if you business type falls into certain "preferred business type" you will be automatically approved regardless of credit. In the industry we know certain types of companies work better and have less issues than other. To give you an example, if you are a restaurant and go into a bank and try to get a loan, 9-10 banks won't even look at you. However in the merchant services industry if you want an account you will be approved 99.9 out of a 100 times. A merchant services account is just an open line of credit, just like a loan. If i had a little more info I would be able to give you exact details. Hope that this helped. If you need any more info don't hesitate to ask.

Admin

seamlessB 07.07.2006. 03:30

How can I get a startup loan for a small business with less than perfect credit and little down? I'm starting a small siding company and need some startup money, but have little down and less than perfect credit. I have 10 years of experience and am tired of making someone else all the money and me nothing to show for my efforts.

seamlessB

Admin 07.07.2006. 03:30

The business of lending is a dense one and should be researched properly. To get started, I suggest contacting the Small Business Administration (SBA). Entrepreneur also offers a great site dedicated to money & finance ? see below for both.

Research, research, research ? this cannot be stressed enough. Read as much as you can about the process. Here are some book titles that are relevant:

* How to Get a Small Business Loan: A Banker Shows You Exactly What to Do to Get a Loan (Small Business Series, No 1) by Bryan E. Milling
* The SBA Loan Book: Get A Small Business Loan--even With Poor Credit, Weak Collateral, And No Experience by Charles H. Green
* The Insider's Guide to Small Business Loans by Dan M. Koehler

There are plenty of free informational resources out there. Check the source box for links to articles.

Hope that helps! I wish you much success & happiness in all your ventures!

Admin

Christopher P 07.07.2013. 21:36

How does the average person afford a house? They just seem to be so expensive. I can understand if you are well to do and have a good job, but I even have friends who I know well, but I do not want to ask them, as it may be rude, they don't make a huge amount of money, yet they own a house. Even if they are paying it off little by little it still seems to be a huge expense. Can someone explain to me how the loans work how perhaps small business owner joe, can get a loan and pay off a 450 thousand dollar house. That's one big loan! Does being married help with buying a house?

Christopher P

Admin 07.07.2013. 21:36

1) You don't ever think of yourself as average.

2) You design your life, your career, and your finances so that you can purchase the things that are important to you.

3) You start with a very modest home, certainly not one that costs $450,000, and you move up when it is right for you and your family.

Admin

Fredrick W 19.02.2007. 12:53

Where can I obtain a microloan from and what do I need to get it? I want to open a small business, but I have little to no credit, so I figured this would be the best way to go about it, but how?

Fredrick W

Admin 19.02.2007. 12:53

You can check with microloan providers. They typically fund up to $30K.

Read about the SBA Microloan Program http://www.sba.gov/financing/sbaloan/microloans.html . If you think Microloan Programs are less strict than a bank, think again. While each intermediary sets their own criteria for loan eligibility, the general requirements include some type of collateral, and the personal guarantee of the business owner. The collateral may include equipment, contracts, inventory or other property.

The basic questions often asked by the loan providers include:

Is this a start-up or existing business?
How much money is needed, and for what purpose are the funds intended?
Who is included in the management team, and what is their experience?
What collateral is available?
How much have you already invested or are you willing to invest?

The microloan needs to be paid ? at a given interest rate decided by the loan intermediary.

The source listed below has a link to state by state microloan providers in the US

Admin

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