Face the Finances

The Roman playwright Plautus once said “You must spend money to make money”. However, does this ring true for those without proper financing? What if you’re an aspiring small business owner trying to launch a product into the market, or an existing owner focused on sustaining company growth in the long run? How do you gain the proper funding to set things in motion?  This question required expert opinions from the lenders firsthand.sbe collage
This week, I had the pleasure of revisiting the Center for Women and Enterprise (CWE) for their Financing Strategies: Learn from the Experts event at its Eastern MA office in Boston.  CWE is a non-profit organization that provides networking and career training opportunities to businesswomen in the New England area. For more information, check out last year’s Celebrating CWE recap!

The program kicked off with a morning session featuring 5 panelists, each with diverse financial backgrounds: Daniel Gennant, AVP Relationship Manager at TD BankKatelyn Johnson, Venture Capitalist Associate at Sigma Prime VenturesJerry Johnson, Volunteer Consultant at CWE, Alana Morris, Bilingual Loan Consultant at Accion, and Lisa Gonzalez Welch, Economic Development Specialist, Massachusetts at Small Business Administration (SBA). Each panelist gave an overview of their role and offered key insight on how to become financially savvy. The discussion also included an active Q&A session with attendees, all in various stages of their professional careers. Here are the main takeaways from the event:

Back up your Business with Documentation

Only so much can be achieved on a whim. Serious business owners looking to broaden fundraising capabilities must demonstrate solid financial standing. According to Daniel Gennant of TD Bank, who has experience working with companies under $10 million in revenue, traditional banking institutions are typically more wary in giving out loans to startups because they involve greater risk. Fortunately, some banks like TD Bank are preferred SBA lenders, willing to discuss options with candidates who provide a thorough scope of credentials including a formal business plan detailing financial projections, tax returns, and credit reports. It all comes down to having an established track record that will earn the lender’s trust.

Determine what Source of Funding is Right for You

WordItOut-word-cloud-1415540 copyAside from banks, there’re alternative outlets to generating funds. Non-profits like Accion for example, specialize in micro-financing programs for businesses with at least 6 months of industry experience. They even offer perks such as incubator space arrangements for startups who need a physical location to carry on daily operations. If you’re looking for a more creative approach to fundraising, crowdfunding may be the right move. Summarized best by Jerry Johnson of CWE, rather than going to a financial powerhouse for a loan, this process involves an online platform for raising a small amount of money from a large group. Look at the success of portals like KickStarter and GoFundMe and the projects they’ve been able to support through strategic campaigns. There are also federal agencies like the Small Business Administration which are a valuable resource for helping small businesses meet their full potential. With over 30 locations and 300 counselors, the SBA doesn’t act as a vendor themselves, but partners with other lending institutions to acquire capital. Depending on the applicant’s qualifications, as much as 75-85% of loans can be refinanced as well as low interest rates negotiated. Lastly, if you’re curious about venture capitalist firms, the stakes are greater. Take Sigma Prime Ventures, a $125 million dollar fund that focuses on the B2B sector. With VCs, money is given on the premise that your company will deliver a sizable return in investment. According to Katelyn Johnson of Sigma Prime, roughly 70% of venture-backed projects end up up closing. So why go through it? VCs offer great exposure into the business world as well as strong networking support.

Be Proactive on Social Media

An active social media presence is a solid indicator of business engagement.   If you’re not on social media, you’re not current, and no one wants to work with a company that’s out of touch.  Managing a strong customer base and promoting your brand effectively will attract those with deep pockets.  

 

Regardless of size, being financially savvy is essential in leading your company. Take a good look at your business plan and analyze it from the lender’s point of view. It isn’t enough to present an idea that you’re passionate about. Be prepared to lay out X, Y, and Z. Prove that your company is a smart investment that serves everyone’s interests.  

 

Are you a small business owner with a success story? How did you meet your financial goals?

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tatia.sikharulidze@live.com

14 Comments

  1. This sounds like a great event to gain more insight into financial strategies and options. It is always important to have a good business plan. I suspect some of the strategies are more or less relevant depending on the nature and goals of your business. The plan would likely help sort that out too.

    • Thanks for your response Donna. The event was extremely insightful for an owner looking to broaden financial strategy understandings at any stage of the business.

  2. It would have been interesting to have a representative from a crowdfunding organization on the panel. If you are a small business startup it is my impression that it is getting harder and harder to get bank or VC backing. Part of that is becasue of the shear number of would be start ups but also because of the large percentage that fail which is making the funders more selective.

    • Thanks for your response Ken. While this event showcases just the scope of financial resources available to small businesses, the playing field has intensified so that only a select number graduate to the big leagues.

  3. I’m wondering if banks are more supportive of small businesses and if venture capital is sought more by entrepreneurs? Seems like with the state of things now across the world, there might be some division on who gets the money from whom. Sounds like a most valuable conference Tatia for start-ups and growing businesses.

    • Thanks for your response Patricia. In my opinion, there’s hesitancy from the smaller businesses around working with banks to come up with refinancing options even though they are SBA preferred institutions like TD Bank that offer programs in this particular field. If you demonstrate your qualifications both from a branding and financial standpoint, discussions on where to seek funding should become more open regardless of the source.

  4. It is difficult for those who wish to start up businesses. Support and finance is required to at least get the business on it’s feet. I wonder how many great ideas are never manifested due to lack of money and guidance.

    • Thanks for your response Phoenicia. I wonder if there’s a survey out there asking how many ideas small business owners couldn’t see through because of lack of financing. It’d be interesting to see the results, especially if they break down by industry.

  5. I agree this sounds like a very worthwhile event. I find the whole crowdfunding process fascinating, I’ve participated in panels where we reviewed entrepreneur pitches for their crowdfunding projects and admire their enthusiasm and hard work. It’s got to be frustrating to put so much of yourself into one of these projects and then see someone raise $50,000 for egg salad or something equally frivolous.

    • Thanks for your response Marquita. Crowdfunding platforms have opened doors to a variety of campaigns, that nothing seems of limits. I saw the headline of the egg salad and was in disbelief haha. That’s so fascinating that you participated on panels in this area! What types of pitches stood out from the pack?

  6. It’s really just me at the moment and may be in need of financial assistance in the future. That being said, I do believe that if you are not present on social media or have a functioning updated website, it can be detrimental to getting financial assistance. I work with small business clients to make them with their social media presence so I see the need day in and day out on how the impact of a poorly designed website affects people perception of a business. Thanks for sharing these links.

    • Thanks for your response Sabrina. Although I’m active on social media, I hadn’t thought seriously about its ties to financing opportunities and how having minimal presence may look negative from a lender’s perspective.

  7. This is a great overview of the various ways that small businesses can obtain needing funding. I have a fan of crowd funding as I like the idea of raising small amounts of money from a large group and crowd funding also requires a strong social media presence in order to be successful so it tackles both issues.

    • Thanks for your response Michele. It’s exciting to see more innovative tools for fundraising take off.

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