Finance a business venture
NerdWallet recently named Maine No. 11 among most entrepreneurial states in the country, based on information from the U.S. Census Bureau’s County Business Patterns and data from Small Business Administration loans. In addition to this ranking, there has been an increase in initiatives encouraging entrepreneurial thinking and new business ventures across the state, including visits from ABC’s “Shark Tank” and AOL co-founder Steve Case’s “Rise of the Rest.” While these are great investment opportunities for startups, what happens when your pitch does not get chosen by the judges?
Business Lending Solutions has seen an increase in the number of Maine startups, from Fort Kent to Kittery, looking for funding over the last year, mostly a result of the increased statewide momentum and a growing economy. Overall, borrowers seem to be more cautious at both the state and national levels, many believing it is impossible to fund a new business. This is only the case, however, if you do not plan well.
The following are some key tips to follow when planning and seeking capital for your new venture:
1. Find key experts and resources: Scheduling a consultation with a local organization or your financial institution before getting too far into the process can start you off in the right direction. Access to these can steer you towards the right path and help you build a plan for long-term financing options without the added pressure.
2. Develop a good business plan: Put the time and effort into explaining how you came up with your numbers. There are resources available to help create a well-thought-out business plan, such as the Small Business Development Center. Make an appointment and they will tell you what to bring, help you develop real numbers, review existing assets and walk through a cash flow projection. For example, if you want to open a sandwich shop, you need X dollars, over X years and will need to repay X — how many sandwiches do you need to sell in order to repay the loan?
3. Identify what you actually need: If you want to open a tattoo shop, do you really need to buy a building or can you just rent a space? Do you need the new equipment now or is it better to purchase later when the business has grown? It is important for startups to strike a balance; there is a minimum bar that every new business needs to meet to be able to operate. Do your homework and be realistic.
4. Know your competition: Research not only who your competition is, but also where they are located, their pricing structure, what they do and do not do well and, most importantly, how your business is different. You will need to prove that you are going to add something unique or needed to the marketplace that will lend to the venture’s success.
5. Check with your local government: Often local governments have revolving loan funds, which supply small businesses and entrepreneurs with funding needed to get started or to larger corporations to grow. Portland’s Revolving Loan Program, in particular, assists when there is a financing gap or when businesses are not able to access conventional financing. This in turn facilitates economic growth and job creation in the region.
6. Be honest and open: When speaking with a lender or financier, answer honestly and keep an open stream of communication. You may be passionate, but it is important to paint a clear picture for them, explaining your reasoning behind the venture honestly.
The most important and final insight that I have to offer is do not start a business if you will not love what you are doing in five years. Be sure you are personally vested in making the business work and in it for the long haul.
Will Hatt, senior vice president and chief operating officer at Hampden-based Business Lending Solutions, can be reached at whatt@mainebls.com
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