One of the fallouts of the real estate bust is that fewer banks are providing business loans and those who are have tightened their guidelines.
Small business financing, especially start-up funding is harder to obtain than it has been in years, and that’s even with numerous SBA programs available. Banks simply don’t want to take more risk, even the minimal amount involved in an SBA loan. The same is true in Canada of the BDC.
As you start your search for funding, you will find exceptions to the rule. Several banks did not invest a large amount in mortgage financing and still have funds to lend qualified businesses. But these banks did not avoid one risky scene only to enter another. They will seek well prepared business plans that outline a detailed strategy, proving that your business is worth investing in.
Banks have been hit and have learned their lessons. But they have also made money investing in small businesses and aside from that, bankers do like to see their clients grow. Ask any banker and they’ll tell you that one of the favorite parts of their jobs is getting funding to qualified business owners. But guidelines have tightened and banks are not always the best, or the only place to look for a loan.
For banks to realistically consider your funding proposal, it is very important that you present your plan as if they were a prospective business partner (and in many ways they are). Projected financials should be detailed and realistic rationale must be presented for projected income and sales figures. A marketing plan is crucial. So is past experience, but less so. The business plan should be detailed and crisp in format and answer all questions that a potential partner or investor would seek to ask.
Once you have a realistic plan in place, you may not be limited to seeking bank funding. Numerous private investors exist and they will need a business plan as well. We’ve written before about the new Association of Entrepreneurs, an organization based on a revolutionary idea that combines business education (from consultants with up to 25 years in the business) and motivation with networking for business owners only. The Association’s website, www.mybizuniverse.com, lists a service that seeks to connect loan applicants with lenders and private investors.
In between the bank and the private investor are more aggressive lenders such as UPS’ financial loan division, a service they provide to corporations, and hedge funds. There are also equity investors available such as angel groups and funds who usually present at small business associations such as the one being arranged by the Association of Entrepreneurs, which is currently screening a number of angel funds and will ask several reputable ones to host a business roundtable in the coming months. Several venture capital associations also host similar forums and the Association directs members to these discussions and events.
All of these methods will help you find funding for your business. Readers are also able to email me for advice on their business proposal or for business plan assistance.
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