Table of Contents

Introduction (10 pages)

I grew up in a small business family. At 16 I was driving a delivery truck and sweeping the warehouse floor. Owning a small business is the dream of many Americans; unfortunately the challenges and frustrations of financing the dream take their toll on many business owners. The local bank wants a credit score of 720 or better, two or three years in business, and a fat bankroll in a savings account. “If I had that, I wouldn’t need a loan from the bank,” my Dad used to say. Fortunately, banks, credit unions, and private “hard money” lenders have the funds to lend. Main Street business owners just need to know where to look and how to prepare for the meeting and application.



Part 1: “The Journey of a thousand miles begins with the first step” —Lao Tsu

There comes a time in the life of every small business owner where they will need cash they don’t have for working capital, expansion, or to avert a crisis. Most people start with a visit to the bank.



Chapter 1: Building a Relationship with Your Bank: Date Before You Marry  (16 pages)

Most banks and credit unions want to work with small business. Not unlike your Main Street business, they depend on daily transactions and deposits. But don’t think you’re married to the bank down the street. Shop around, talk to a few bankers and find the bank that suits you and your business. If you already have a relationship with a bank, don’t assume that you can’t move your accounts to another bank or credit union. Don’t forget you are the customer, not the other way around. In this chapter you’ll learn:

1. How to get acquainted with your banker
2. How to find other banks that might be interested in your business
3. Why your relationship with the banker is critical when it comes time to ask for a loan
4. How to determine if this bank is right for you and your business

Chapter 2: A Visit to the Bank: Popping the Question (16 pages)

Because you’ve got a relationship with your bank and banker, that’s likely the first place you’ll go. Depending on your credit score, how many years you’ve been in business, and your relationship with the bank, it’s a great place to start. That being said, preparing for your visit to see the banker is critical. Francis Bacon said, “Knowledge is power.” This is very true when you visit the bank. Before the loan officer pulls up your credit score or history with the bank, you should already know what they are going to see. I have a lawyer friend who suggests, “In court, don’t ask a question if you don’t already know the answer.” That’s good advice when talking to your banker. In this chapter you will learn:

1. How to analyze your financial status from the viewpoint of the banker
2. How to prepare for your visit to the bank
3. What type of information the banker be looking at to make decisions about you
4. Where can you access that same information so you can be prepared
5. Why the bank might reject your loan application What to do when you get a “no”

Chapter 3: Keep Your Relationship with the Bank Personal: When the Honeymoon is Over (12 pages)

Once upon a time there was a very motivated business banker. He was my banker. He went out of his way to make sure we were taken care of. He would make sure we knew about all the bank services we could access and just how to do it. I had his personal cell phone number and could call him if I had questions. What’s more, if we had a problem that needed to be addressed in person, my partners and I could stop by his office and barge in just about any time. Our relationship with his bank worked, because he worked for us. Unfortunately, not all bankers are like this. Nevertheless, a personal relationship with your banker is important. When I was first starting out, my relationship with the banker often made the difference between whether or not I got the loan. That might not be true anymore, but a good banker can help you navigate some of the myriad of options available to you (even if he or she can’t personally help you). In this chapter you’ll learn:

1. Why a personal relationship with your banker is important
2. How to pick the right bank and the right banker
3. How to make sure your banker has your best interests at heart
4. What you can do to foster a good working relationship with your banker
5. Using the relationship to turn a “no” into a “yes”

Chapter 4: Getting the Right Bank Loan: My Porridge Is Too Hot!  (14 pages)

Banks and credit unions typically offer two kinds of small business loans: a line of credit or a term loan. Like Goldilocks, you need to find a loan that’s “Just Right.” In this chapter you’ll learn:

1. The differences between a term loan and a line of credit
2. Why, depending upon your circumstances, one might be more attractive than the other
3. The best time to apply
4. Typical terms

Chapter 5: Navigating the Maze of the SBA: Are We There Yet?  (16 pages)

When the government talks about small business, what they’re saying might not be what we’re hearing. The government looks at small business differently than most Americans do. You might be surprised to know that Uncle Sam likely considers a $30 million firm with over 200 employees a small business. Needless to say, the financing needs of the bookstore around the corner is quite different. In this chapter you’ll learn:

1. What types of SBA loans are available
2. What it takes to qualify Where to apply
3. Improving your chances of getting an SBA loan
4. Typical SBA loan terms

Part 2: “We’re not in Kansas anymore” —Dorothy

The harsh reality of financing a small business is the fact the only ten percent of business owners who make the trip to the bank get a loan. Not to despair—money, from other sources, is usually available. But with strings attached.



Chapter 6: Angels, Venture Capital and the Myth of the Shark Tank (14 pages)

The media talks a lot about Venture Capital (VC) and funding startups. Television makes it look like VC firms and angel investors are lining up to take your great idea and give you the money you need to get your restaurant or other great idea off the ground. Although there might be investors looking for something like your small business, the truth is, an angel investor or VC firm is looking for a sexy tech startup and not equity in your Main Street business. So where does a great small business idea find the cash they need for working capital or to expand? In this chapter you’ll learn:

1. Why most angels and VC firms aren’t interested in Main Street businesses
2. How to find VCs and angels
3. How to evaluate if you’re a fit for a VC
4. What VCs want in return
5. The angel down the street: when local investors come to the rescue

Chapter 7: The Sun Will Come Out Tomorrow: There are Options (16 pages)

If you’ve been to the bank and been turned down for a small business loan, you’re not alone. In fact, only about 10 percent of the small business owners who go to their bank end up getting financed. However, it isn’t the end of the world. The hardest part for most small business owners is facing the reality that the bank isn’t interested in them and they’ll need to turn to alternative sources of financing. If you found yourself walking back to the car rejected by your banker, take an honest look at your where you are in your business and let’s look at all the alternatives to a traditional loan from the bank. In this chapter you’ll learn:

1. That you’re not alone—90 percent of your small business colleagues got turned down too
2. How to make an honest evaluation of your current situation
3. Where do you go from here—an outline of the options
4. When it makes sense to bolster your balance sheet and go back to the bank

Chapter 8: Asset-based Lending: Need a New Piece of Equipment? (12 pages)

Sometimes it helps to be specific. If your reason for a loan is to purchase machinery or tools (work vehicles, manufacturing tools or computer hardware/software) to conduct business, there are lenders willing to use the purchased equipment as collateral. Many lenders like this type of loan and will often finance 100 percent. You can also use an equipment loan to obtain cash for equipment your business already owns. In this chapter you’ll learn:

1. What qualifies for an equipment loan
2. Other options for asset-based lending
3. How to tell if this type of loan is right for your business
4. Where to find lenders who make equipment loans
5. Typical terms for asset-based lending

Chapter 9: Factoring: Tap Your Accounts Receivable (12 pages)

Poor cash flow has killed many small businesses. However, there are lenders willing to make you a cash advance for pending business transactions. For example, if you’re waiting for an invoice to be paid, but need to fill a short-term cash flow gap, there are lenders willing to lend you a percentage of the money owed. This type of cash advance allows a business owner to mitigate cash flow emergencies and otherwise keep the business going forward. In this chapter you’ll learn:

1. About Accounts Receivable Financing and Purchase Order Factoring
2. How to tell if this type of loan is right for your business
3. Where to find lenders who make equipment loans
4. Typical terms for factoring

Chapter 10: Real Estate Loans : Location, Location, Location (12 pages)

Another loan designed to fill a specific need is a commercial real estate loan. This type of loan is designed to help small business owners finance office buildings, warehouse space, retail shops, industrial buildings, or other stand-alone buildings. Like home mortgages, this type of loan typically has longer payment terms, but more frequent interest rate changes, than other types of business loans. You can also use a real estate loan to obtain cash for real estate your business already owns. In this chapter you’ll learn:

1. What qualifies for a commercial real estate loan
2. How to tell if this type of loan is right for your business
3. Where to find lenders who make real estate loans
4. Typical terms for real-estate loans

Chapter 11: Merchant Cash Advances : Credit or Debit? (12 pages)

If your business does a lot of credit card transactions, a Merchant Cash Advance allows you to access a cash advance for a commission on your future credit card sales. In this chapter you’ll learn:

1. How to tell if this type of loan is right for your business
2. Where to find lenders who make merchant cash advances
3. Typical terms for merchant cash advances

Chapter 12: They Call It a Credit Card for a Reason: Don’t Leave Home Without It (12 pages)

A business credit card might be a good way to handle certain business expenses. A credit card can make it easy to track expenses while building your credit. Some credit cards offer rewards programs which include frequent flyer miles, cash back, and other unique benefits. In this chapter you’ll learn:

1. What small businesses can use a credit car for
2. What kind of credit cards to avoid
3. How to avoid unexpected credit card fees
4. Typical credit card fees
5. “I financed my movie using 22 different credit cards!” Myths and dangers of credit card-based finance

Chapter 13: Peer-to-Peer Loans: Brother, Can You Spare a Dime? (12 pages)

Peer-to-peer loans are offered by an individual rather than a lending institution. The borrower specifies the amount and terms of the loan and is connected to individuals—often “hard money” lenders—who want to invest their money in the business. In this chapter you’ll learn:

1. How a peer-to-peer loan works
2. How to connect to individuals willing to provide a loan
3. What makes a good peer-to-peer relationship
4. Friends and family: Beware
5. Typical terms for peer-to-peer loans

Chapter 14: Business Acquisition Loans: I Need Money Now Before the Opportunity Slips Away (12 pages)

A business acquisition loan could make it possible to finance a new acquisition or buy into a franchise. Oftentimes an SBA guarantee is used to secure the funding for the lender. In this chapter, you’ll learn:

1. What qualifies for a business acquisition loan
2. Where to find lenders who make acquisition loans
3. Typical terms for acquisition loans

Chapter 15: Franchises: There’s a Loan for That (12 pages)

For Main Street business owners interested in purchasing a franchise, there are loan products designed specifically for that. Franchise loans are almost the same as other commercial business loans. However, when buying a franchise it’s wise to make sure you’ve done your homework. In this chapter you’ll learn:

1. What loans are available for purchasing a franchise
2. How to evaluate a potential franchise for purchase
3. Where to find lenders who make franchise loans
4. Typical terms for franchise loans

Chapter 16: Startup Funding: Crawl, Walk, Run (12 pages)

One of the biggest challenges facing most budding entrepreneurs is finding enough capital to get things rolling. Few want to lend to companies with untested business models—and untested entrepreneurs. However there are loans available for starting a new business. Finding the money to start a new enterprise may consist of a combination of options mentioned earlier in this book or may be a lender who specializes in helping new businesses get started. In this chapter you’ll learn:

1. What are the loan options for startups?
2. VCs and tech startups: Matches made in heaven and elsewhere
3. How to make the tough decisions about bootstrapping or financing your startup
4. Your last hope: Friends and family revisited
5. Typical terms for startup financing

Chapter 17: Crisis Borrowing: Help! (10 pages)

Borrowing when you’re in the midst of a cash crisis isn’t usually a good idea. But you need money. Here’s what to do.

1. Take a deep breath or three
2. Take stock of your situation
3. Loan options
4. Maybe it’s time to give up the ghost  

Chapter 18: WOSB and other Loans: It’s No Longer a Man’s World (12 pages)

Women need not apply? Not necessarily. For one thing, discrimination based on gender and other physical characteristics like color is illegal. But for another, there are a number of loan options designed specifically to encourage women-owned businesses—along with loans designed to help minority owned businesses too. In this chapter you’ll learn:

1. What qualifies as a woman- or minority-owned business
2. Government programs for women and minorities
3. Where to find lenders who make those specialized loans
4. Typical terms for loans to women- and minority-owned businesses

Chapter 19: Small Business: The Backbone of America (14 pages)

Millions of small businesses dot the country—6 million with 20 or fewer employers, in fact. Many of us patronize them to buy our groceries, fill up our gas tanks, get a haircut, or launder our shirts. We hear a lot from the politicians who talk about how important small business is to the economy. I think it’s past time that they stopped talking about helping small business and started putting their money where their mouth is.



“The [SBA] defines a loan to small business as any business loan of $1 million or less. So a $1.1 million loan to a chain of dry cleaners with $5 million in revenues doesn’t get counted, while a $500,000 loan to a 150-worker auto parts wholesaler does.” (Let’s Stop Praising Small Business—and Fund More, Gary Belsky, TIME Business, August 6, 2012)



Is there any wonder it’s so hard for anyone, including small business owners, to understand what politicians are talking about when they talk about small business? Unfortunately, there’s no easy answer to the financing challenges faced by Main Street business owners, but it’s long past time for politicians (both red and blue) to come to the table with ideas that will help the very entrepreneurs that are the most likely to create jobs and fuel the economy. Hopefully, there will come a time when there won’t be a need for a book like this. Until then, don’t take a “no” from your banker for an answer. You have options.

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