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Creative Financing Tips

By STEVE STRAUSS, AOL SMALL BUSINESS
Posted: 2009-11-04 12:00:46
Filed Under: Small Business Experts, Small Business Finance, Small Business Funding, Small Business
Steve Strauss
Steve Strauss
Q: I have been looking for funds to grow my business without much luck. Where do small businesses go these days to find the money?

Ron

A: Do you want the bad news of the good news first?

The bad news is that this remains one or the most difficult times ever to round up money for starting or expanding a business. The mortgage crisis spooked both the government and big institutional lenders, so now there are far more hoops to jump through to get a small business loan than ever before.

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    But thankfully, there is good news too, and it's coming from several fronts. First, the stimulus package passed earlier this year allocated almost $1 billion in additional revenue to the SBA, and much of that was earmarked for small business loans.

    However, while it was a step in the right direction, it clearly was not enough, so President Obama recently announced additional measures totaling some $15 billion that he hoped would really spur small business lending and growth. The program will:
    1) Increase the amounts the SBA could lend for various loan programs and
    2) Allow smaller community banks to borrow from the TARP program at low rates.

    That last point is important. These days, it is the smaller community banks and credit unions that may be your best bet for getting a loan. These sorts of institutions are part of the community, they know small business, and are often easier to work with.

    But beyond traditional loans, I would like to suggest that you look at some unconventional ideas as well.

    For instance, in the early '80s, two out-of-work journalists came up with a great idea for a new board game. This was strange, since not only did they know nothing about that sort of business, but a new board game had not been invented in many years. Scrabble and Monopoly were about it at that time.

    But they put together a great plan and got about 70 of their co-workers, friends, and family members to invest $1,000 each for a share of the company. That $70,000 was enough to get their game off the ground.

    Do you think those people who invested a grand each for 1% of Trivial Pursuit were happy, or what?

    So the friends and family plan is another tried-and-true funding method. It is great because you likely will get very favorable repayment terms. The caveat, of course, is that you had better not fail -- owing money to people close to you for a failed venture is not a pleasant experience.

    Here's another possibility: Speak with your manufacturer or supplier. They may be willing to give you inventory on consignment -- which is almost like cash -- and they have even, in some cases, been known to lend their customers money. After all, they want your business, and if you have a solid plan for paying them back, they just might go for it.

    Another creative option is to find a partner with money. You offer sweat equity and a good plan, and they can offer the cash needed to start or expand. Note: A silent partner is really just an investor, whereas a full-fledged partner would be someone with whom you would work every day, so you had better be sure your styles are compatible.

    Another sort of investor is the angel investor -- someone who made a lot of money in a certain industry and is looking to re-invest some of it in the right sorts of businesses. You can do an online search for angel investors, and you can also find them by networking.

    One area to probably avoid is refinancing your home; it is just too risky -- if something goes wrong, you put your abode at risk.

    No, it is not easy finding the money you need to start or grow your business, especially these days, but it can be done. If others did it, so can you.

    ------------
    Steven D. Strauss is one of the country's leading small business experts. The senior USATODAY.com small business columnist, his latest book is the Small Business Bible. A lawyer, author, and public speaker, Steve speaks around the world about small business and entrepreneurship, including a recent visit to the United Nations. He has been on CNN, MSNBC, ABC, and The O'Reilly Factor among many others, and his business column, Ask an Expert, appears weekly at USATODAY.com. If you would like Steve to speak to your group, help your business grow, or if you would like to sign up for his free newsletter, "Small Business Success Secrets!" please visit his website -- www.MrAllBiz.com.

    Want to be part of this column? Ask Steve a question at AOL@MrAllBiz.com. You can follow him on Twitter @SteveStrauss.

    2009-11-03 14:14:51
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    weregettingpaid 09:43:40 PM Nov 22 2009

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    I have the soloution to a recession-proof opportunity to make great money in today's economy...Technology is advancing everyday and now you can reap the benifits of this money making business....I'll Show you How visit my website @ www.5linx.net/L394108

    jdsmithseal2 12:09:53 PM Nov 22 2009

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    I am currently an established grant writer/consultant. In order to be eligable to receive a business grant you must have a updated business plan. If you don't have a formal business plan I suggest you start with th Small Business Development center (SBDC). They are located at modt Universities. They will give you the basics of putting together a businedd plan and the classes are free. There are over 15,000 federal programs and over 40,000 foundations that assist small businesses and indivuals. For further asistance see website: dreamhomesolutions.services.officelive.comJD Smith

    sassyhotdogs 02:18:00 AM Nov 19 2009

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    Durning thest times, being a small business owner is actually good business, You will find most people with avoid large business in fear of gouging, dumping trash on the consumer, and going out of business before the warranty goes out.The small business owner is the back bone and has been the back bone, they have not been given the credit they are due. They work hard for their money and the big boys just count it as it comes in, and you are just a number in the system. But when you buy it from Bob, Bob knows your name.

    telentia 12:14:09 AM Nov 19 2009

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    You want to be your own boss, you want to chart your own destiny, so the first thing you do is what? Seek financing so that you can hand the keys to your new business over to them? Thomas Jefferson once stated, "The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale". To learn how to be your own boss, chart your own destiny, and to start a business from little more than an idea - send an e-mail to Telentia@aol.com and include the words "Newsletter Request" in the subject header. You can follow along with our start-up company in "real-time" as I share all of our steps and business processes with you. The e-newsletter is sent out quarterly and is free of charge.Michael William MillerCEO - Telentia TechnologiesA Transformational Innovation Company

    hdane 10:40:00 AM Nov 18 2009

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    One of the most popluar options that has not been mentioned for small retail establishments and restaurants, is business credit card factoring. These programs such as the one our company has offered for the past (10) years requires no security or collateral, and does not have a fiixed repayment period. Usually, funds are wired into the merchants account within 10 days. Personal credit score is not a major factor, as our underwriter's look at the gross sales of the particular business. Although this program may not the needs of all situations; it provides a vauable option for those businesses that need immediate working capital. Additional information can be obtained from our website at www.fundingsourcesforbusiness.com.

    gibster1070 05:36:58 PM Nov 15 2009

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    I have a novel idea, how about working for money. Cash for clunkers, help for people who bought homes they can't afford, unemployment, medicaid, college money, revitalization and modernization act, food stamps, ADC, etc. The beat goes on and on and on......... The best way to get someone to work is to stop paying them when they don't. There are jobs available, but people don't want them. If it's beneath your dignity to work at McDonald's, why isn't it beneath your dignity to accept unemployment? Don't bother responding to this, I won't be reading your garbage responses.

    gadwall 09:05:11 PM Nov 12 2009

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    With credit card companies raising rates and lowering credit...unemployment in the double digits....I think the Christmas shopping year will be a bust.All we need is a few of the big "anchor" stores at the mall file for Chapter 11 and we will see malls around the country closing.The stimulus is not working either. I think we are in real trouble folks.....and for the long hall.

    sky7728 04:39:34 PM Nov 12 2009

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    Back in the 80's I commented to a banker that their new credit tightening policies were going to cause a recession. They did. Now the banks are doing it again. As was then you have to prove to the bank that you don't need the money before they will let you borrow any.

    rigalo 12:27:36 PM Nov 12 2009

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    What do you do to start impeachment proceedings of a President????????

    aspooners 07:26:49 AM Nov 12 2009

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    It is definitely odd that banks got hundreds of billions of bailout dollars..our money and then closed the doors to us. How could this have happened? This is a crooked society and we are sheep. There should be money flowing and nothing but good things coming our financial institutions instead of this can't help you crap. They stole and then screwed us again. That bailout money should have DIRECTLY to the people and let all those criminal institutions fall flat and start all over again. A lot of them need to be in jail right next to Bernie Madeoff.

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