Forums: Discussions for entrepreneurs and small business.

Hi all

Me and my partner have a great concept and a good business idea that our local market is well in need off. 

We have a solid business plan and a good credit score.  We will be asking for $400,000 and have about 25% of it to invest into our venture out of our own packets.  We also own a home to show as colateral.

We are thinking of trying our local bank that offer SBA loans first.  May have a chance there.  The question is, what are the steps to start moving towards SBA guarantee loan program?  I would like to have all the ducks in a row before aproaching a banker. 

Do we need to have something to be approved by SBA before we go to the bank.

Also, if bank will not give us anything, do we have enough to turn to Angels?

Thank you for your help,

High Regards

Russ 

Hi Russ and welcome to Start up Nation.

I doubt that the SBA is a great resource for you and your partner. They're a government agency and by statute they can't provide a loan guarantee if the creditor's credit profile enables him to meet his need for credit without their involvement.

Since you guys have good credit scores, some money for a down payment, and collateral to secure the loan, I don't think you would have any trouble getting the loan from a bank. I don't know what bank you're banking with, but I'd avoid the Bank of Americas, Wachovias, Wells Fargos, and the like because their credit decisions are usually made somewhere else.

Talk to a smaller, regional bank. These banks typically enjoy much higher levels of customer deposits than the Big 5 and are thus better equipped to meet the needs of customers who need credit. Moreover, they usually make their credit decisions on site, which means, you'll likely get a chance to talk to the person who carries some weight in the decision making process.

Just a final thought. Have you really thought this through putting your house up as collateral? Depending on your business, this might be a very risky move.

Good luck. If you feel like discussing your project in greater detail, please send me a PM and I'll try to give you a few more pointers.

I hope this helps.

Mark

Thank you for your reply. 

I certainly wouldnt put and probably will not put my house forward if I dont have to.  But it seems so difficult to get the money for the startup, it is comforting to know I have that option.

On another front, I was hopping to get all ammount in bulk ($400,000) but it seems that I will have to come up with something else.

As we were working on our plan and considering our concepts, we had one certain property as a model location for this project.  It had everything that we were and would look for once we are ready.

This morning driving to work.  Guess what.. This property is up for lease.  Now, things take on a different shape.  If I get the spot my project will be a huge success.  It has all the elements of a perfect location. (I have to mention that I have been involved in simillar projects for the last 5 years).

So now I have to change the strategy.  I may need to break the whole amount into 3 or 4 parts to get me started.  The bank may not be the ultimate solution for this either.  

What do you guys think of this? 

Mark

What is the best way to PM you?

Thanks

Also, consider looking into community banks that you have already built a relationship with.  Sometimes they have a little more control over approving loans, as opposed to the major lenders.  Depending on your ethnicity, you may have easier access to funds.  Generally, there are more lending options available to businesses that are atleast 51% woman/minority/veteran/disable owner owned.

And, before approaching anyone, make sure you have a business plan.  This is a must for lender, otherwise it appears that you are not serious about your business.

I guess what you need is an angel investor, in this case. Angels are, indeed, a great alternative if you can't get a bank loan, plus they also provide management advice. I read you already have the business plan, what you need is a good executive summary and you can start contacting investors. If you lack the necessary suitable contacts to refer you to some angels, an option (a good one) is that you download an angel investors directory. Use the trial version first, to see how it works. Then you can select investors according to your business needs, that is, amount invested (see portfolio companies history), stage and industry preference, geographic location, previous proven success with other funded companies. After that, send the selected prospective investors a teaser email, directly from within the software and convince them your business is worth investing, as it will bring a high ROI. Then comes the pitch, that is, the face-to-face meeting and hopefully in a few months you get the funds. For more encouraging news about entrepreneurship and how to raise venture capital, visit VCgate Facebook Page.