One of the most offensive and marginalizing phrases I've heard over the last nearly 30 years of working with business owners is "friends and family" money. The term is thrown around as a standard part of the business start-up funding process, as though all of us are just waiting for the ink to dry on our business plans before calling up Uncle Bob to say, "Hey, I'm ready for that $10K, now." |
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I come from a family of modest means. On my father's side, my grandparents got indoor plumbing in the 1960s, when my father installed it for them. There was no Uncle Bob. And, for most Americans with a dream of business creation and ownership, there is no Uncle Bob.
There are other strategies for funding a business, however, so don't let the absence of an Uncle Bob intimidate or dissuade you.
Some things to remember:
- SBA-backed loans are specifically for small businesses that would represent too high a risk to banks if the SBA did not step in and guarantee them. If the bank you're talking with doesn't do SBA loans, find a different bank. (See #4 below)
- CDFIs (Community Development Financial Institutions) provide financial services in low-income communities and to people who lack access to financing. The funding they provide is more flexible than a traditional bank and can often be combined with traditional financing. There are CDFIs in all 50 states and Puerto Rico, and you can download a list here. (Sidenote: I love Puerto Rico. If you have a chance to go, The Gallery Inn in Old San Juan is amazing.)
- Small Business Development Centers (SBDCs) offer low and no-cost assistance in navigating funding options. They often will assist with writing Business Plans, as well. Find an SBDC in your area here.
- Not every bank is the same. Some are very small, some are regional, and some are national. They all say they work with small businesses, but for many of them, that is just marketing. Also, "small" for most banks (per the SBA) is under 500 employees, so your definition of small may be different than your bank's. Ask your network, including other small business owners, for their referrals and ask what they like about their banker. Ask business consultants like me, because we know which bankers are the real deal. Talk with a few bankers and select the one who is the best fit for you, and build a relationship, because as your company grows, your banker should be your trusted partner.
I hope this is a good start. Now, go big or go home, folks! |
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