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View Full Version : Small business financing is a huge pain in the butt - atleast it has been for me



JailBaitBurritos
06-17-2016, 01:54 PM
Obviously, financing for small business can be a bitch and a half. I have personally had trouble getting loans less than the $1 million benchmark; it is as if, Banks have decided that you are too small time if you are asking in excess of $1 Million.

For the past year or so, I have been working on a restaurant called Jail Bird Burritos - the idea itself is about having fun, cheap, and delicious food. Just to give you an idea of the type of food we sell: Our Breakfast burrito is called the Mess Hall Queso Quencher - it is pretty much Potato, egg, sausage, ramen noodles, queso cheese, and sour cream - the ramen might give you second thoughts but trust me these burritos are DELICIOUS! Anyways, I have a location in Southern Florida, and I have been trying to get a $150,000 loan, and nearly every bank and financer have declined me - might I add that my credit score is phenomenal, so this is not a matter of trust - just the bank deciding I am not worth their time.

I have thought of refinancing my company but SBA-backed loans, or Investment lenders might be a better option.

I have a couple friends/ acquaintances that have taken on SBA loans, and I have looked into it - so far it has been a much better experience than working with the banks, but I have not committed quite yet.

Harold Mansfield
06-17-2016, 02:11 PM
It's not about trust as much as it is that restaurants are a risk because most fail, and credit score is just part of what they look for. What they really want to know is that they'll get their money back. Collateral goes a long way in showing that to them. Just trusting you is not enough for that. Banks don't loan money to regular people based on trust and a good idea like in the commercials.

Bobjob
06-17-2016, 06:00 PM
I recently attended a "Where's the money" seminar my local chamber of commerce hosted. It was very educational and definitely worth my time. I received contacts about micro loans, million dollar loans angel investors and all other types of financial options.

My dad's friend agrees with you. He said, you have a better chance of getting a 4 million dollar loan than a one million dollar from a bank.

wayne62279
07-28-2016, 09:01 AM
Its really about the risk.
I work for a commercial lender, and we go as low as 10k and as high as 5 million, so it has nothing to do with the 150,000
What we would look at is the following:
1. Persaonal credit (which you said was great)
2. Time in business (anything under 2 years is considered a "start up", so keep in mind, even with your 800 score, you may get a rate like you have a 600 score because of this)
3. Bank statements (if you are showing average daily balances of 1000 and monthly deposits totaling 8000, your business income would not justify a 150k loan)
4. Potentially personal and business tax returns. We dont need those in most cases up to 150k, but as you are a start up, would most likely be needed
5. Is it equipment you need or cash? An equipment loan is longer and lower rate because its secured. Cash is unsecured, so you'd need really strong bank statements, and have to pay it back in under 2 years.

These are just some things to keep in mind when applying for any amount

turboguy
08-03-2016, 12:03 PM
It is a bit funny.

When you don't need money you have to fend off all these calls from people who want to loan it to you.

When you need money it is hard to get someone who will give you the time of day.

TAAccounting
11-30-2016, 03:30 PM
Hey Jail,

I actually really like your idea on the cheap food and yummy burritos. I actually wished I had that near my campus when I was in college =)

As to your problem with connecting with a bank - might I offer a different approach. Most banks aren't going to trust an everyday person or give them the benefit of the risk when it comes to lending. But what I have found is many banks are willing to listen if you are backed by a person they know and trust. I would recommend asking a bank if they have an accountant they can refer you to who can look at your business plans, the financials, the debt coverage, and so on. Make sure to ask the banker if this accountant has done deals with the bank in the past - and what those deals were.

What this will achieve is it gives you an additional person who can vouch for your business, financial future, and so on. Finding this person can be a game changer for you especially if you are looking for funding and getting the door slammed on you by the banks.


Here is an example of how this helps:

In St. Louis, there was a couple who owned a furniture import/export company. Great credit score, great business concepts, and several million dollar contracts that were coming to fruition. They needed $250,000 for working capital to buy the inventory additional inventory, revamp their website, and focus more on high-end marketing. What they got for 2 years of chasing down bankers was nothing more than a preliminary meeting and the door slammed in their face.

That's when a banker they had in the family referred them to me. A little bit about myself - I am an accountant who functions as an Outsource CFO for small to mid-size companies. I focus on cash flow, cost management, financial growth, budgets/forecasts, and the likes. But more importantly, I am plugged in with the banks (about 27 of them in four states) doing "turn around" situations and advising their bankers on cash flow analysis. When I met with the couple, I started by learning about their business and their goals. Then, I cleaned up their financials and put together a cash flow analysis.

Finally, I took it back to the bank and advocated for the couple to the bank president. Being a person they knew and trust, they agreed to do the loan and released the funds in two weeks.

The point of this example is, you need to find the person who is doing what I do for the banks in your area. Get connected with that person (normally an accountant) and have them advocate for your business and why you need the funds. The questions the banks are going to have is "How can you repay this?" "How did you arrive at the dollar value?" "Who reviewed your business plan and projections?" and so on

I hope this helps!