Securing Funds

For serious business owners, many funding options exist. For the conventional owner, one who has assets and good standing in the eyes of banking institutions, the first option is to apply for a small business loan from the bank. Most banks have divisions devoted solely to the assistance and growth of local small businesses. Before approaching a bank for a small business loan, however, it’s important to evaluate as many different banking institutions as possible to find the best fit. You should schedule meetings with the small business banking decision-makers at each institution.

There are two goals you need to accomplish at these meetings. The first is to find out about the bank’s past lending trends. Ask about what types of businesses they are most comfortable lending to, and gauge their familiarity with the HME industry. It will make for an easier sale if the individuals involved in the loan process are familiar with the unique concerns of your company. Secondly, you want to make a personal connection with the individual you are speaking with. You want this person to get to know you and to feel comfortable with you so that when the bank is in the process of making a decision, you have at least one advocate in the room.

Another funding option is the Small Business Administration (SBA). Get involved with your local district office. Their counselors are able to assist you with your business strategy and inform you about the many small business loan programs and grants that are designed for those who may have trouble qualifying for a traditional bank loan. Although the SBA does not loan money, the loan programs they provide are used as guarantees to the banks. These programs provide assistance that reaches many who otherwise would not be served by the private sector. The SBA is also an important source of capital and training assistance for low-income women and minority business owners. It can also help owners identify federal and state grants for business start-ups and expansions.

Because some banks tend to treat small business owners as just another number, looking for funding from those who know you best—friends and family—is a viable option. In this case, you should still make a presentation as if you were applying for a loan through a lending institution. Each aspect of how the money will be used, the business forecast and the rate of return should be discussed at length. Each person you speak with already knows your commitment and personality, so once you reveal the business strategy, he or she should feel more comfortable investing in your business venture than a banker would. When you make a pitch to your friends and family, it is important that you create a formal setting for the presentation. You should address them not as friends and family, but as investors. You need to impress them with your business strategy and rate of return, and let them factor in the relationship afterward.

Venture capitalists will also work closely with management. After approaching a venture capitalist with a business summary, business plan with detailed projections and marketing materials, you may be granted an interview. Venture capitalists look for business owners who are experienced in their trades and have established, reputable management teams. The first few minutes of your interview are crucial. They are looking for someone they can trust. Developing rapport can determine whether they will choose to work with you. Venture capitalists generally make investments of $50,000 to 
$500,000 and ask for 30 to 40 percent ownership. Therefore, it’s also important to know how much you are willing to give up before you engage in this type of interview.

The unconventional business owner, who has no credit history and a small amount of assets, may seek funds from angel investors. Angel investors are 
usually successful business owners who can offer valuable business insight. These investors commonly take on small start-up businesses within a 50-mile radius of home and provide funding from $150,000 to $1.5 million. For those who became business owners for independence, there is a downside to angel investors. These investors require anything from 5 to 25 percent of your business, a seat on your executive board and stock options. They also seek, on average, a 26 percent return rate on the investment. The relationship between an angel investor and a business owner is a delicate one, so choose your investors wisely.

The start-up process is like a tightrope walk without a safety net. Although you may lose your balance, stumble or hang on for dear life, falling is not an option. Remember that successful business owners know exactly how much they need and can explain to the potential funding source how every penny will be spent.