Fund Raising 101

As a Small Business Consultant (www.thesmallbizexpert.com) I find it amazing that so many Small Business types begin their business without a Business Plan and more importantly, the necessary funding to give their business a fair chance of Small Business Success.

I am working with several Small Business Clients who operate successful ventures, but who are at a tremendous disadvantage when attempting get financing for their businesses. One client, Ms. W (not her real name) operates XYZ Academy (not the real business name either). Ms. W is a favorite client of mine and she has a noble calling for her business. She is committed to her business and her staff , parents and children love her!

Her problem is this! She, like many Entrepreneurs, started the business on a string and a prayer. She did not have a well thought-out business plan and had no real funding to boot. (I met her because I was the Manager of the property that she ultimately leased for her business.) It is almost a miracle that she has survived, under the circumstances. (Extremely high rent, No real Business Plan, inadequate financing, etc.)

As we have now identified a property which they can own, instead of continuing to pay extremely high rental rates, she is encountering problems getting the most favorable interest rates and the loan to value (LTV) is much lower than they need in order to make the deal work.

We started this acquisition process with the idea that we could find financing at the 80-90%LTV level; i.e. with a 20% down-payment by my clients. We could only identify financing at the 60%LTV level. This was due in large part to the lack of business financials. (If we had the financials, the process would be completed with an SBA loan at the 90% LTV level.) Now, instead of being prepared to close immediately, we have to work at identifying additional (GAP, Bridge) financing to make up the difference between the 60%LTV Loan offered and the 80-90% Loan needed by my clients.

The lesson to be shared, from the example above is this:

1. Complete a Business Plan before you start you business. (Refer to it often!)

2. Identify your sources of Funding. (ABC; Always Be Collecting (Funds)).

3. Keep your Financials up to date.

Follow these simple suggestions and you will save yourself a lot of time and even more money.


If you have questions or suggestions, please direct them to us at : gdstanford@thesmallbizexpert.com.