On Tuesdays at 8-9pm EDT we host a chat where small business owners can ask questions, share stories and make new contacts. Follow hashtag #smbiz on Twitter. To follow the next chat go to Tweetgrid.com on Tuesdays at 8pm EDT and follow along . If you want to add to the conversation, you must have a Twitter user account.
Our 4/14/09 topic is Small Business Funding & Lending.
Expert Panel of Funding Specialists:
* John Reddish (@GetResults) - President at Advent Management Int’l, Ltd and director and/or member at other firms
* Jessica Shorthall (@jessicashortall) - Social entrepreneur and startup finance expert
* Leslie Bocskor (@lesliebocskor) - CEO and President at DLTA Ventures, LLC
For more details about how the chat works see Where To Turn For Small Business Answers.
Question 1: What are some first things to consider when thinking about acquiring funding?
Lesliebocskor Q1 Clarity about the project you are attempting to fund is paramount. Due Diligence and knowledge of your area MUST be broad and deep #smbiz
GetResults Take proj budget & add at least 25% for start. Does require clarity on need. Too much better than too little #smbiz
SternalPR @GetResults How can you tell how much you need? #smbiz
GetResults @SternalPR inside and outside help are important. Looking for problems is key #smbiz
Lesliebocskor @SternalPR It is good to have help, yes. That is why team building is a cornerstone of a fund-able project. #smbiz
GetResults Oops both prior refer to Q1. New rule, slow starter. #smbiz
SternalPR @GetResults What kind of problems to look for? #smbiz
GetResults Q1 - what could go wrong, who else has to be paid (suppliers) where price can change, etd #smbiz
GetResults @jessicashortall Q1 SBA guarantees can help there. Key is good plan, not necessarily lots of equity (helps though) #smbiz
Zwierko @CathyWebSavvyPR In today’s economy there are lots of private investors looking for a better bet than the stock market. #smbiz
Smallbizlady You need to to clearly understand how big you want your company to become, and when you’ll need funding again. #smbiz
Jessicashortall #smbiz Q1 sounds simple but knowing your lender’s criteria is key. many sm businesses walk into banks w/not enough equity already in the biz
GetResults @smallbizlady Q1, I’m on loan committee at SEEDCO and its all SBS and PA $$$. Good deals there. #smbiz
GeriRosman Q1, Can you give some info on how SBA loans work? Requirements for size of business? #smbiz
GetResults @smallbizlady Q1, yes there are opps w comm banks, need to be careful though, not all are friendly #smbiz
GetResults @smallbizlady Q1, as will most community banks #smbiz
Drjfpmd @GetResults Q1 how does SBA help home based business? #smbiz
GetResults @GeriRosman Q1 SBA are secured loans for brick/mortar and work cap. Pers guar req, fund up to 90% and up to $2MM #smbiz
Lesliebocskor Q1 Another great mechanism that is appearing in the U.S. is micro financiers such as http://www.angelsinaction.tv/ #smbiz
Jessicashortall @SternalPR Q1 sometimes. but also just businesses that don’t have enough historical financials behind them #smbiz
GetResults @WayneLiew Q1 it’s tough, very tough today #smbiz
CathyWebSavvyPR RT @GeriRosman: Q1, Can you give some info on how SBA loans work? Requirements for size of business? #smbiz
Smallbizlady the deal with SBA loans is that they will put a lien on any property and current and future business assets. #smbiz
Question 2: Outside of a traditional bank, what are some other options for small biz funding?
GetResults Q2 leasing cos, angels, SBA, licensing, REITs, factors, friends & family, credit cards #smbiz
GetResults Q2 also suppliers, customers, RPC’s, your savings #smbiz
GetResults @smallbizlady Q2, good point. Do U want to be small biz, smaller biz, or big biz #smbiz
GetResults @SternalMrktg Q2 where to go for funds depends on deal, on client, on marketplace #smbiz
Smallbizlady Q2 Nonprofits doing microlending and larger deals such as http://www.Seedcofinancial.org are a good source and CDFI’s are good too. #smbiz
Drjfpmd RT @lesliebocskor Q2 1st level funding = founder, 2nd lvl = freinds & family, 3rd lvl Angel investors, 4th lvl = professional investo #smbiz
GetResults @smbiz Q2 range is from about 5% up to 25+% #smbiz
GetResults @GeriRosman Q2 SBA may not be way to go, nor comm banks, there are other sources depending on kind of biz #smbiz
GetResults @drjfpmd Q2 not too well, but depends on deal and growth potential. Starting in garage not impediment. #smbiz
GetResults @GeriRosman Q2 think Microloan - up to $35K in SBA version, up to $50K in others #smbiz
GetResults @jessicashortall Q2 for some, projections sell, particularly if you have some collateral or a co-signer #smbiz
Zwierko you could also look toward industry partners who are looking to diversify their offerings. #smbiz
GetResults @SternalPR again, depends on what you want to accomplish. Start w savings be beholden to nobody #smbiz
Zwierko you can always find funding with through MBDA #smbiz
Zwierko @SternalPR as long as you can keep your overhead down #smbiz
Smallbizlady Community banks are really the way to go. Markee bank brands will not loosen credit until 2010 #smbiz
Zwierko @SternalPR Minority Business Development Agency #smbiz
SternalPR @zwierko Yeah but naturally you have to be a minority, right? #smbiz
Question 3: What can you do to better your chances at getting funding?
lesliebocskor Q3 Investors will often look 2 the track record of those involved, & make a decision based on their belief in their ability to adapt #smbiz
Lesliebocskor Q3 Team is critical to improve funding chances, better to have an A team with a D project than a B team with an A project. #smbiz
WayneLiew What do you guys think is the best form of startup funding? #smbiz
Lesliebocskor @WayneLiew The best form of startup funding will depend on the project. My broad answer would alwyas be the founders own capital. #smbiz
Question 4: What rate can a small business borrower expect?
Zwierko @SternalPR if the majority of the biz is minority owned. Woman, AFAM, HISP, AA… #smbiz
Smallbizlady Lien on the current and future business assests will keep them from being collateral for later when the biz needs more money to grow. #smbiz
GeriRosman @smallbizlady Holy cow! If you’ve been “bootstraping,” could you possibly qualify? Not property owner yet #smbiz
KhyatiMehta Hello everyone! I just joined a start-up company and I couldn’t have found a better forum to discuss the funding! #smbiz
Smallbizlady @zwierko I am not sure if women owned businesses can borrow from MBDA. #smbiz
Jessicashortall @GetResults agree w you but bankers still saying they’re seeing “pie in the sky” sm biz owners walk thru the door for loans #smbiz
_djh @zwierko So woman owned = minority? Good for government work too. #smbiz
Smallbizlady @GeriRosman Its really tough with the SBA if you do not have any collateral, and they want it even from micro loans. #smbiz
SternalPR @jessicashortall You mean biz owners with unrealistic biz models or expectations? #smbiz
GeriRosman @GetResults Thanks! My needs are much smaller –technology, equipment but “micro business.” Not bricks/mortar #smbiz
GeriRosman Seems like I’ll have to stick to bootstrapping for now! Appreciate the info #smbiz
Smallbizlady WBDC’s and other local non-profits doing microloans are teh best best for home-based folks. You can get 10% of revenues typically. #smbiz
Lesliebocskor Q4 As to rate that a lender may ask or demand, in small business funding, EVERYTHING is negotiable and deal specific. #smbiz
CathyWebSavvyPR @GeriRosman @getresults @smallbizlady have’t I heard recently about some micro loans in the US, like those in 3rd world? any links? #smbiz
Smallbizlady private equity and even angel investor many times boil their decisions down 2 the mgmt team of the firm. Particularly their B-school #smbiz
GetResults RT @smallbizlady: WBDC’s &other local NFP’s doing microloans R best best 4 home-based. You can get 10% of revenues typically. #smbiz
Lesliebocskor @CathyWebSavvyPR Yes, there are microlenders appearing in the U.S. now, such as http://www.angelsinaction.tv/ #smbiz
Question 5: Does all lending to a small business require a personal guarantee?
Lesliebocskor Q5 Many lenders 2 small businesses will ask 4 a Personal Guaranty. Wouldn’t you? 
That does not mean they should get it,. #smbiz
SternalPR @lesliebocskor Has it always been that way, or is that a new rule given recent credit crisis? #smbiz
Smallbizlady Q5 Absolutely. Lenders want you 2 have skin, you typically can’t get away from personal guarantee until you reach 5-10MM in revenue #smbiz
Smallbizlady Skin in the game that is, you must be willing to lose something too. #smbiz
Lesliebocskor @SternalPR Entrepreneurial lenders have always sought a PG if they could get it. The economy determines whether they can or not. #smbiz
Zwierko Q5 I had to give a PG on my LOC #smbiz
SternalMrktg LOC??? RT @zwierko: Q5 I had to give a PG on my LOC #smbiz
Zwierko @SternalMrktg Line of Credit #smbiz
GetResults @smallbizlady Q5, if then. I have clients w $20MM sales and still guarantee portion #smbiz
Smallbizlady personal guarantee have been around all of the 10 years I have been an entrepreneur. #smbiz
CathyWebSavvyPR @lesliebocskor Definition of PG relating to Loans - I missed it #smbiz
Question 6: When is an ESOP a viable way to purchase a smaller business?
GetResults @smbiz Q6, usually you need about 100 employees to make an ESOP worthwhile #smbiz
SternalMrktg ESOP=Employee Stock Ownership Plan RT @smbiz: Q6 When is an ESOP a viable way to purchase a smaller business? #smbiz
Question 7: What should be your next steps if a bank recommends a turnaround consultant?
GetResults @smbiz Q7 - Buyer Beware, turnaround consultants recommended by banks get most of their biz from banks. May not be best choice. #smbiz
Jessicashortall not Q-specific, but want 2 mention there is big difference between “slow grow”, lifestyle #smbiz & potential venture-backed start-ups
GetResults @jessicashortall noQ - what I call small, smaller and big biz. Small stay small, smaller on way to being big. #smbiz
SternalMrktg @GetResults Q7 What does a turnaround consultant do? #smbiz
Lesliebocskor Q7 If a bank will definitively lend 2 you if you bring someone on, do it. Always take the money because the future is uncertain #smbiz
Lesliebocskor Q7 If someone wants you to bring someone on, and then maybe lend. Evaluate the consultant with extreme due diligence. #smbiz
GetResults @SternalMrktg Q7 turnrnd consults help structure troubled biz for recovery. Sm cos have poor record surviving Ch XI #smbiz
GetResults @lesliebocskor Q7. I disagree. Their objectivity can be tainted. Recommendations only ones that conform w bank ideas. #smbiz
Lesliebocskor @GetResults Q7 I understand yours and others concerns, which is why I say take on a lender reccomended consultant ONLY if either #smbiz
Lesliebocskor @GetResults Q7 it guarantees your getting good funds or if they would be a good hire as a stand alone regardless #smbiz
GetResults @lesliebocskor Q7, worth considering, but have found they are more loyal to their bread feeders than clients. #smbiz
Lesliebocskor @GetResults Q7 They are, I often look at it as part of the cost of capital. #smbiz
GetResults @lesliebocskor Q7 chuckle. Keep your friends close, enemies closer. Could work #smbiz
Question 8: What should you keep in mind if you will ask someone else to invest in your business?
CathyWebSavvyPR RT @smbiz: Q8 What should you keep in mind if you will ask someone else to invest in your business? #smbiz
Lesliebocskor Q8 I always reccomend 2 keep in mind when asking for OPM is that someone sweated and labored for that money. Respect it. #smbiz
Jessicashortall Q8 align incentives. do you have similar goals for growth? for exit? have you clearly addressed who makes decisions in the #smbiz?
GetResults @jessicashortall Q8 Excellent point. Same page is key. #smbiz
Question 9: Should you finance a business with a credit card?
Lesliebocskor Q9 Financing a business on a credit card is a risky thing. If the funding yields rapid cash flow, then yes, otherwise…. #smbiz
WayneLiew @smbiz Q9 I know a lot of people fund their startups that way but not sure whether it’s the right thing. #smbiz
GetResults @smbiz Q9 Credit card financing is for short term, readily pay back needs. Never use for long term. #smbiz
Jessicashortall Q9 sometimes it’s inevitable 2 finance with credit card. but remember it’s 1 of the most expensive legal forms of debt. use sparingly #smbiz
KhyatiMehta What are key points to cover while making presentations to angel investors? #smbiz
Lesliebocskor @KhyatiMehta Some of the key points to cover when presenting angels are: 1) Safety of capital. 2) Exit Strategy & WIIFM #smbiz
Jessicashortall @KhyatiMehta re: angels: opportunity, market, team, financials, what you’ll do with the money. keep it simple, be honest but positive #smbiz
Can any panelists rec. any links, books or resourcs to help smbiz when trying to secure funding?
GetResults @smbiz there are tons of resources out there. It is a Buyer Beware Mkt. Think it through and check several competing sources. Best. #smbiz
Lesliebocskor Resources for entrepreneurs = www.linkedin.com, http://www.angelsinaction.tv/, http://angelsoft.net/ and many other socnets #smbiz
SternalMrktg @lesliebocskor Ur so right on LinkedIn. There are so many Small biz, startup groups to join and talk with people. #smbiz
Jessicashortall #smbiz a good mentor can often beat a book/website. try SCORE, retired businesspeople, angels, other entrepreneurs 2 share war stories with
Lesliebocskor @SternalMrktg I have gotten funding from friends and family. The key is your relationship, the project is secondary. #smbiz
{ 1 trackback }
{ 0 comments… add one now }