Opinions expressed by BIZ Experiences contributors are their own.
Seeking money to start your business? George Dawson, author ofBorrowing to Build Your Business (Upstart Publishing,$16.95, 800-594-3943), has plenty of ideas. With 23 years as abanker under his belt, Dawson knows what bankers look for whenmaking a loan. As owner of small-business finance consulting firmGrowing Your Business, in San Antonio, he also knows where to gowhen banks say no.
Business Start-Ups: Where should anBIZ Experiences start looking for financing?
George Dawson: Financing a start-up is like a layer cake.The foundation layer is your money; the frosting is the bank loan.There are plenty of [financing sources] in between. Finding themrequires persistence and a willingness to explore all theavenues.
BSU: How can you increase your chances ofsuccess?
Dawson: Successful bank borrowers have three thingsin common. First, a commitment of their own capital. [You shouldcontribute] 30 percent of what's needed--whether in tools,equipment or cash. Second, extreme familiarity with theirindustries. Third, you need ample collateral, or your loan has tobe SBA-guaranteed. The further you are from these idealcharacteristics, the less likely you are to get bank financing.
BSU: Then where do you go?
Dawson: The next step is friends, family--people who havea noneconomic reason to help you. Some rules: Be sure theyunderstand the risk and what you're promising in return; putthis in writing. Pay them back as soon as you can.
Friends and family can also guarantee loans or pledge collateralon your behalf. You can pay them for that; it's a deductiblebusiness expense and a way to make the loan more businesslike.
The next step is finding microlenders in your community. In SanAntonio alone, we have four programs that lend to different typesof small businesses--and we're a small and poor city. Find outwhat exists in your town or state. It takes a lot of digging. Oneof the best sources is the SBA's Small Business DevelopmentCenters.
The third source is local businesses that invest in other localbusinesses. They're often called angel investors; I prefer theterm affinity investor. That's someone who, when youtell them your business concept, immediately understands whatyou're doing. Affinity investors are suppliers to yourindustry, people who sell to your customer base, or even yourcustomers.
Affinity investors are the hardest group to find. If you'rein a big city, you can find them through investor clubs or venturecapital clubs. If you live in a tiny town, there's probablyonly one person in town who does this, and everyone knows who heis. If you're somewhere in between, you have to go findthem.
BSU: How?
Dawson: I guarantee that, right now, you know someone whocan lead you to someone [who could be an affinity investor]. Make alist of everyone you know and who they might know. Add everyone whois a supplier to your industry, sells to the same customers or is acustomer. Look in the paper to see who's recently sold acompany and made money; who's done an IPO; what chiefexecutives have retired and might have money and time on theirhands.
Then ask them for advice. "Here's my business plan;here's what I'm thinking about doing. What do youthink?" Don't ask for money. If they like what they see,they'll volunteer it. If they don't, ask who they know thatyou might want to talk to.
BSU: What's the most important piece of adviceyou'd give someone seeking a loan?
Dawson: Have a good, well-researched business plan.That's not exciting, and it's not what people want to hear,but you have to think the whole thing through.
Contact Source
Growing Your Business, (800) 594-3943, gdawson@txdirect.net
