Start Business Loans

Where can you go to finance or get a start business loans? Who is likely to give you the money you need to get going? The major entities to consider are:

- Banks - The small business administration- Angel investors- Venture capital- Friends and family- Grants and foundations- You

These are the major ways to get financing to start your business. To qualify for any of them you have to have a well thought out business plan for them to review so they can make an informed decision.Go to the Planning link (click here) if you need to create a business plan.

Banks

I was in my bank the other day setting up a new business bank account. I went to the teller and said:

“I’d like to set up a NEW business bank account”

She gave me a strange look and said I don’t handle those. You need to go to the desk over there. I did as she asked and another woman was helping me. She asked a lot of questions (homeland security needs to know) and one of the questions was did I need a start business loan. I said that I didn’t need any money and she was visibly more relaxed. She told me that she has hundreds of people a day coming in that want a start business loan and they rarely qualify!

The moral of the story; Banks don’t give loans!

I know that’s hard to believe, but in all my years of experience banks are the last place people go to actually get money to start up a business. Unless your relative is the president of the bank you’re not likely to get anything from them.

A huge waste of time!

Of course banks won’t tell you that they won’t give you a loan until you have filled out every form and jumped through every hoop they give you. You can waste a huge amount of time and energy and get NOTHING at the other end.

I bought a commercial building ten years ago that I could have paid cash for. But I wanted a mortgage, so I took my financial statements, filled out all of the forms and spent hours with a VERY inexperienced “loan officer.” At the end of the process she called and said:

“We’re not INTERESTED in doing this loan.”

I said, “I didn’t ask you if you were INTERESTED in this loan, I asked you to do the loan.” After a lot of arguing and talking hirer up in the organization I was able to get the mortgage. This loan had all of my personal assets as collateral and the building itself as collateral, so it should have been a NO-BRIANER, but it wasn’t.

It’s been my experience that banks only want to lend to people who already have a lot of money. Banks may lend to a person seeking funds for a “cool” industry (like bio-tech), or maybe the bank is new to the community and wants to attract customers.

I’ll give you an example of a “cool” industry. As I was seeking my building loan, a vendor I was working with got a signature business loan, from the same banking institution that was trying to turn me down. They were a new web site design company and at the time the web was very new. They had no collateral, but they got more than twice the money I was asking for on a signature.

Established banks loathe small business loans! Please don’t spend a lot of WASTED time trying to get money from them. If you must go to a bank, go to a small bank or to a bank that has just entered your market and NEEDS customers.

The Small Business Administration and start business loans

The small business administration may be a place to consider for getting a loan. Remember it IS a government agency, so there will probably be a ton of paper work. But they do approve loans that:

- Are between $200,000 and $600,000- For those with a lot of EXPERIENCE working in the field of your business

They will also make an independent assessment of your probability for success. If you fit those criteria, it’s probably worth your time to apply. But if you need more money or you don’t have a lot of experience, I wouldn’t bother to apply. Again, it will take up a lot of time and energy, and you need that to apply to your new venture.

Angel investors

Angel investors are defined as people with a lot of money looking for something to invest in.

They may invest because you’re a minority or because you’re a woman.

They may invest because they like your business concept or because you believe in the same cause they do.

They may invest because you have invented something they’re intrigued by.

Generally, Angel investors are in retirement or close to retirement and they want a new adventure. There are a surprising amount of businesses financed using this method. Many, many more than you may realize.

I’m aware of a business that received almost a million dollars for start business loan from an Angel investor simply because this investor wants to help Women start up their own businesses.

The next obvious question is how do you find these investors? Consider the old saying:

“It’s not what you know, it’s WHO you know”

You find Angel investors by networking; going to meetings and groups where you can meet these kinds of people. Also, ask everyone you know who they know that might be willing to invest in your business. I suspect that there some in your circle of friends who know someone who would consider investing.

WHY do they invest? They’re BORED! New business ventures are fun, exciting and interesting. It gets them back into the saddle rather than sitting in a chair watching TV. Believe me, finding Angel investors really works.

One caution however is to make SURE they have an ARMS LENGTH relationship from your business. You have to run your business otherwise it’s not likely to be successful. If you do find and Angel investor, be clear with them about your expectations and you should be fine.

To learn more about start business loans:

- Venture capital- Friends and family- Grants and foundations- You

And start business loans please click here.