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Tuesday April 7, 2009

Release Date: 04.07.09 | Location: All Metro Atlanta | Organization: SCORE Atlanta

Passion is Not Enough to Snag Small-Business Funding

A SCORE business counselor advises, "Think outside the box"

By: Jerry Chautin, SCORE volunteer/business columnist

"I am passionate about starting my own pet services business" Deborah posted on SCORE's "Ask an expert" Blog. "My credit is excellent (but) SBA lenders will only consider a loan if there is so much borrower cash infusion." (A link to the Blog is on SCORE Atlanta's Web site: www.scoreatlanta.org)

Looking through the eyes of a lender, Ev Harrell, an Atlanta SCORE business counselor and bank director explains that borrowers must be willing to invest a substantial amount of their own money into the business before lenders are willing to jump in. "If Maryanne is not willing to commit 100 percent to her endeavor why should I, as a lender or investor, put at risk my money or the money of others that I am responsible for?" he says.

In other words, lenders are not willing to take entrepreneurial risks. Even in good times, most bankers will not lend to startups because the risk is so much greater than financing existing, proven businesses.

"Be creative by utilizing multiple sources," advises Adrian Davis, a business counselor with SCORE's McDonough branch office. "But understand that the owner must have skin in the game."

The few lenders that do finance start-ups want to see 20 percent to 30 percent of your own cash in the business. Additionally, they want hard collateral (usually real estate) as a second way to get repaid if cash flow from the business cash flow is insufficient. They also want you to have related industry, financial and management experience.

"Additional sources to complement financing from the SBA lender include friends, family, customers, suppliers, and the landlord; for equipment and working capital," Davis says. "Think outside of the box when approaching these sources for financing and don't just think about seeking a loan or investment, but think about how they can help you start your business."

Notably, SBA's Community Express loan-program can help you snag small amounts of quick working capital without collateral and a minimal amount of your own cash in the deal. Check it out online at www.tinyurl.com/2etzls. The three California lenders that make these loans in Georgia go up to $25,000. And if you are in a low-income area or a historically underutilized business zone, called a "HUBZone," they can hike the loan amount up to $50,000.

The pilot program requires technical assistance from non-profit, business counseling organizations such as SCORE, "Counselors to America's Small Business," Small Business Development Centers and Woman's Business Centers. These SBA resource partners can also connect you with the lender that is best for your circumstances. To find the resource partner closest to you, download the Georgia start-up guide online at: www.sbaguides.com.

But most importantly, Deborah, never give up!