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.
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 Bank, Katelyn Johnson, Venture Capitalist Associate at Sigma Prime Ventures, Jerry 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
Aside 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?