Where and when do you look for business funding?

[Earnest P]

I was wondering if this would be a good place to talk about how much the average small business owner relies on business funding / cash flow finance options for day to day operations vs. pulling operation costs from monthly budget. At what point do you decide that temporary debt is the right move in order not to miss out on things like vendor discounts, seasonal advertising promotions, long term branding as well as short term call to action advertising?

Also, I would like to understand where you look for cash flow financing when you are ready.

Google?
Facebook Ads?
Local Bank or Credit Union?
Respond to Telemarketer Call?
Referred By Friend?
Mail Advertisement?

Note: I run a small business and real estate investor funding advisor platform. The reason I am here is to actually have "real world dialogue" with boots on the ground business people. :cool::confused:

[Ironclad Systems]

I'll be watching this thread. This concept has come up on my radar, so some practical insight would be great!

[Harold Mansfield]

What is this "funding" you speak of? On TV everyone starts with an investment or an easy to get loan because apparently in TV Land people are just chomping at the bit to invest in ideas.

In the real world that's not the case and most everyone here, at least that I've seen, self funded and bootstrapped their way up. I don't think I've ever heard one story of someone on this forum that got a loan without putting up their house or other assets for collateral, or a huge portion of equity in the business.

It just doesn't work that way. Especially in areas where the people with the money, don't really need you. If they wanted to be in that business they could do it themselves.


From what I've seen, investors back things (for a major piece of the action) that are proprietary, or already have significant market share.

So to answer your question, the "best" time to seek funding is AFTER you've exhausted your own resources AND have proven the concept, have some market share or sales to take notice of, and need to go to the next level. If you have no major skin in your own game and haven't been successful yet, no one will invest in that.

Nor will they invest in a business that is nothing but a way for the owner to make a living. That would be a loan.
Investors like things that are scalable. They don't waste time just to get their money back, they want to make a significant profit. it's the same risk.

[Freelancier]

Define "average small". If you're talking about shops with 20-50 people and cash flow issues, they may not be here that much because they're too busy running the business.

[Bobjob]

I went to a local small business financial meeting and learned about different options to get money, it was definitely worth my time. If I needed to get a loan or line of credit I'd go to my bank.

[BusinessFundingPro]

It's also important to keep in mind that the most help goes to those that need it the least. If you are having trouble making payments, your credit is taking a hit, and your bank account is overdrawn, it's already too late to get anything worthwhile. it's important for business owners to assess their own situations and apply for a loan while they are still financially strong on paper.

[Harold Mansfield]

It's also important to keep in mind that the most help goes to those that need it the least. If you are having trouble making payments, your credit is taking a hit, and your bank account is overdrawn, it's already too late to get anything worthwhile. it's important for business owners to assess their own situations and apply for a loan while they are still financially strong on paper.

Yep, but that's not always personal. Yes, there are contributing factors of ageism, sexism, racism and so on. But ultimately it comes down to education. Who knows how to work the system, and has the education to put themselves in the best position, and who doesn't.

The disparity of who gets what "breaks" really starts with education. You're always going to have those "ism" hurdles, but it's easier to get over them when you know how and don't beat your head against the wall just expecting it to work for you the same way it does for everyone else. You have to assume that it will not. If it does, great, you've saved some time.

[bizcoachsteve]

I'd be leery of responding to a telemarketer, FB ad or google search unless you already know about the lender and trust them. I would start with your own bank or look for local banks that do lending. Most won't lend unless you have been in business for at least two years, have strong cash flow to support the repayments, and/or have collateral like inventory or real estate. The banks will be the cheapest. If you are newer, look for a bank that does SBA lending. The upfront cost will be higher but the bank is more willing to lend since the loan is guaranteed by the SBA. Banks tend to lend based on your sales or cash flow, but if you're not profitable, they may not touch you. Also, you have to have good personal credit, with credit scores at least in the high 600s.

Also, look in your industry or industry organization. Some banks specialize in certain industry niches (like healthcare, veterinarians, CPA firms, etc). You may find a willing lender there.

Lastly, I would consider someone like Fundation.com if the other options don't pan out. I've had a client use them with success, but the rates are high. But if it's short-term, easier to qualify, quick and if it moves your business forward, then it could be worthwhile.

To address the question on if you should borrow, it really depends on the reason. I don't like borrowing to support operations or make up for operational losses. But if you can take advantage of seasonal sales opportunities (sales meaning sales to your customers), it can be profitable. I would not do it for things like long-term branding, funding losses or anything that does not have an immediate (3-6 month) payback that increases your profits or increases your sales. Do an ROI calculation to see if it makes sense. Borrowing $20,000 to increase bottom-line profits by $5,000 is not a good investment. Whenever you can, try to use your own business or personal cash flow first. Eat cheaper meals, sell the expensive car, pull back on the spending, save up, and then use that to invest in the business. That is almost always the best way to go in cases like this.