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Pathway To Your Success - Part 8: The Corporate Opportunity – Small Business Financing

Welcome to Part 8 of my 9-part series -- “The Pathway to Your success” -- helping you to discover the small business growth opportunity with the biggest companies in the world. During this series, I have gone through various issues such as: corporate contracts versus government contracts; how to use corporate contracts for legacy business growth, and what that means; what large companies buy; why the time is now for small business owners to get into this game; and what is the mindset for success. For this segment, the topic is “The Corporate Opportunity – Small Business Financing”. I am going to cover this in two parts.

There is a reality TV show pertinent to this topic right now on a US cable channel that features a billionaire who believes that it's still possible to start a successful business with no money. So, he's challenged himself to go out with a camera crew -- with nothing more than a hundred dollars in his pocket and a pickup truck --and figure out how to build a million-dollar business. Now you might be laughing, like most of us that are cynical, thinking this is all for show, but he has changed his  name so that no one knows who he is and he's representing that he's not using any of his vast resources. He just wants to prove that if he can do it, then you can do it, and he has the camera crew to walk you through exactly the steps he's taking and the challenges that he's encountering. He's working with people who do not know his background or who he is, in a city that he's never been in before.

It's fascinating to watch his decision-making process; how he's putting various things together; his flexibility; and the challenges and opportunities he encounters -- basically everything that you have had to go through to build your company, which encompasses the whole challenge of financing your business.

Let's just go back a year or two ago. What are the ways that most business owners used to finance their business? What types of financing have they used within the past 12, 24, 36 months? Below is a list of some of the financing options available to you now. I don't really want you to go through this list thinking, ‘I can't do that, I can't do that’. What I want you to think of through this list is “maybe I've tried that, maybe I will try that”. It's not about why these won't work for you. It's more of which one of these makes the most sense for you. And even if you've tried it and it didn't work out before, how might you approach it differently?

·        The first finance option is, clearly, earnings of the business -- and credit cards if they are available. It's easy to finance your business if you have a cashflow coming in.

·        Second, there are a lot of big companies out there -- American Express, Goldman Sachs, Wells Fargo, Citibank through their Costco program, and several banks actually targeting small businesses because they know that globally small businesses are the growth engine for most economies.

·        Third, large bank loans - - most of us have had our issues with that. I have this thing about banks because after the financial crisis of 2000 through 2005, and 2010, banks have gone back to their old business model of loaning money to people who have proven they don't need it.  Although if you actually are bankable with a bank, go for it. In some cases, if you can't go for large banks, community banks are often very friendly to small business owners.

·        Fourth, there are always friends and family. You can look at private loans.

·        Fifth, if you actually carry inventory or you work with a lot of vendors, there is vendor credit. Oftentimes vendors will work with you to give you favorable terms, whether you go net 30, net 60, net 90. Sometimes you can actually close the sale and get the revenue from your customer before your bills are due for your products.

·        Sixth, leasing rather than paying cash, because you can often lease things at a much lower cost.

·        Seventh, SBA loans and small business association loans here in the U S are very good sources.

·        Eighth, online or non-bank lenders. This is actually a growing market that I don't think people have really explored but can often be a pretty good option for you.

Now, here are some of the bigger financing options: venture capital and angel investors, (more often than not technology attracts venture capital or angel investors, but they dabble in other areas as well); private placement of debt; credit union loans; selling and pledging accounts receivables - or factoring, as that's called; state and regional loan and incentive programs; private placement of stock; crowdfunding; and public issuance of stock if you're looking to actually do an initial public offering. (Not that many small business owners do that quite frankly.)

If you are a woman business owner, some of the more specific things available are small business grants, which can be found on “” for example; the small business innovation research and technology transfer programs; the girl boss foundation grant -- G, I. R. L. B. O. S. S; women's business centers; the economic development administration; and small business development centers. There is also the Amber Grant-Eileen Fisher women-owned business grant; the FedEx small business grant; and the National Association for the Self-employed.

If you are a minority business owner, you also have some options: “” again; the U S Department of Agriculture; and - interestingly enough – the USDA rural business enterprise grant program  (I suspect that, in agricultural communities around the world, there are grants available); small business innovation research and small business technology transfer programs; the minority business development agency (the MBTA); and the national minority supplier development council. Also, in the U S once again, the SBA - a business development program - has grants available; and Operation Hope - a small business empowerment program. Also, If you're just starting and you have some money --  you can take it out of savings, or a home equity loan which is another source that people use.

As you can see, these are pretty exhaustive lists. I'm sure there are other options for the disabled; veterans; service-disabled veterans; and LGBTQ as well.

If you happen to work for a company and you have a 401k and you're using that to get you going, what everybody will tell you is the best time to seek financing is when you don't need it. The idea being that when times get tight, then you actually have already planned for that. You have a working capital line of credit available to you. You have a relationship with a banker just in general - somebody that understands your business might be going through a downturn but knows enough about you to work with you - who knows enough about your industry and what it looks like in your market and is willing to take the risk. You want to make sure you establish a relationship with a banker as soon as you possibly can.

Now I'll bring you back to the undercover billionaire show that I was watching, because this guy started with no money. He didn't actually talk about credit or anything else, but he talked about having just a hundred bucks and his pickup truck. And 5 episodes in, he's done some really fascinating things. He started off with a simple premise -- which was he'd given himself six months to get this business going -- to get it up and running. And he knew that he needed at least three months of capital just to pay his expenses. He knew it would be hard to go out there and build a business if he didn't know where he was going to lay his head and didn't know how he would get food.

So, the first thing he did in getting started was make sure he had three months of living expenses covered. Check this out. He flipped a used car. He had to do it twice. He flipped two cars. He went to a used car lot and negotiated a good deal on a car. He then took the car and went through the car wash, put a for sale sign in it, and sold it for more than he bought it. And then he turned around and did the exact same thing again on a slightly bigger car where he had more money, and he was able to net about six or $7,000 flipping two cars. He was then able to pull out $3,000 to cover an inexpensive hotel for rent; food; and gas for his truck.  The point here is that he was awfully creative. One of the other things he did was look for scrap metal that he could take and sell to recyclers. So, he went to an abandoned construction yard or someplace where there were some warehouses and sure enough, he found some copper and other metal, and he was able to pick up a couple of hundred bucks by selling that.

I'm watching this and thinking this is a guy that is committed to success. He's going to do what it takes. And he's being awfully creative and thinking “what has value? What can I sell? How can I generate cash”? And he's laser-focused because he knows within six months’ time “X” has to happen. Otherwise, he's going to be humiliated and embarrassed. He's going to have to “out” himself in front of all these people and he's going to have to admit that he was wrong: that the average person can't build a $1 million business.

The most creative thing that I saw him do was -- once he figured out how he was going to take care of living expenses -- he went to a small business development center, which is found in most cities within the USA. It may be co-located with the SBA. It may be a part of some university, but there's typically a small business development center. The center provided a whole host of resources for him --  helped him to do his market research;  helped him to get in touch with people, and just provided a tremendous number of resources. They actually gave him an office space with a board room so that he could have meetings, and a telephone and other kinds of things.

The most amazing thing that I saw him do was he created a team. He was able to find about five or six people that bought into the vision of what he was trying to do. He told them point blank that he did not have money to pay them right now, but he noted the timeframe with which he was working and that he was going to make it worth everyone's while once the business was successful. They were all a part of building something from the ground level, from the very beginning.

I've done that. I personally have been on teams where there was no money to pay salaries. And I believed in what we were trying to do and I gifted my time to the business until we got it across the finish line. I've done it twice as a matter of fact. And so, it's not a weird thing. It's not out of the ordinary. You may have done it to the extent that you really and truly had something you were passionate about -- something that you knew you could get across the finish line.

With the resources that I've listed for you: both the traditional ones and some of the nontraditional ones (the undercover billionaire), you can see that there is a plethora of possibilities available for obtaining financing for your business. Some of the ways to raise capital I mentioned will work in other countries. All of them will work in the United States. You just have to figure out how to make it happen. Small business financing is available[FM1] . So, the question becomes “what are you really prepared to do”?

Stay tuned for my last post of this Pathway to Your Success series: “Part 9 -- The Corporate Opportunity -- How to Get Into the Game”.



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