Startup business advice.

[dudemanchoo]

Hello everyone. Ive been lurking for a while and I'd like to thank everybody for being so awesome and giving so much good advice. Forgive me for sounding noobish since Im a noob here. Anyways. I'm in the process of starting an art supply in my city. I need $40-50,000. My credit is below 600. I have a spouse (and biz partner) with excellent credit willing to co-sign/sign on a loan for me. Im in a spot where I need startup capital asap. I cant wait years to fix my credit, we dont really have collateral but we have income to show we can pay for the loan. I realize the position Im in, otherwise I'd be out trying to get an SBA loan or traditional business loan from a large bank. But I'm here asking you guys if anybody has any reasonable and realistic advice or resources to obtain the financing I need to start this business. Im located in Michigan and am trying to work with some local biz development orgs that do microloans and such but was also looking to get some help on here as well. Anything would be appreciated. Thank you and happy new years!

 

[BassTrackerBoats]

You'll need collateral to raise that capital from any kind of conventional source... a home equity line of credit would be how one would typically get that to start a new venture if it was a loan situation.

No SBA lender would look at it as the amount is way too low and that would require collateral as well... unsecured for a new start up from a traditional source is just not out there.

If you have a 401K or other retirement money that could be a source if you were dead set on starting this although I would almost never suggest one hit that up.

Kickstarter or the other crowd funding sources may be an option but I think this would be a long shot as it is not glamorous or sexy enough to garner a lot of attention.

Borrowing against a couple of credit cards is another option but one that I would not consider either if I were in your shoes.

Your best bet may be a business partner that has cash and an interest in a small business such as this but not much in terms of working knowledge but that would be a bit of a long shot as well. For the microloans you are talking about you may need a very strong resume reflecting your background in that specific industry, a very solid business plan with a 5 year proforma and an executive summary put together professionally.

I honestly don't see it happening for you unless you have collateral and you mentioned you did not.

Bad news I am sure but I've done a lot of commercial financing back in the day and there are no real sources for the scenario as you described that I have ever run across.

 

[timothywcrane]

I would try to structure your business in stages. Have you thought of venture partnering with other businesses in your area to find shelf space instead of going all out for store in the beginning? This MIGHT (as I have no data on your industry) give you a leg up in selling some product in the beginning and possibly give you a track record with a supplier or two that you can further leverage. While it might not give you exactly what you want, you might be able to get better buying terms (net 90 or better) that could help you with immediate cash flow relief. Another option might be right in front of you... going virtual and venturing with galleries etc to get you in front of local prospects if that is the market you want to stick with. Hacking off the need for floor space and employees, and even trying to get away with preselling before purchasing will relieve most of that debt need. I have found from recent talks with VCs that the idea of investing in anything other than an established C-corp with an established record is a waste of time if there is a single brick involved anymore. Not that they are looking to jump back into another .com boom, but the risk is seen as completely non essential and thus an unneeded risk and expense. I am NOT saying to follow up on vultures... for obvious reasons, but these boys are usually looking 5 years ahead of any other investing org, and about 25 years ahead of anything 100% conventional.

I do think crowd sourcing might be an option IF you are able to raise a good percentage of it before you place your project in front of them. It also helps to have a "feely" twist in mind and pick the appropriate CF platform in the beginning KickStarter is the biggie, but they are not the only name in the game.

You might have to split your goals into smaller pieces to get it done, but bootstrapping can not only get you the money you need in the beginning, but ut you in a better financial position when you REALLY need the money, in the growth stage that comes right when most people start to have to deal with their startup debt. Undercapitalization is the main source of business failure (80%), but is usually 100% avoidable, especially today.

Good luck... Never give up. That's where the 95% that never start up fail and where the other 20% that do usually fail.

 

[dudemanchoo]

Thanks for the advice guys. I do plan on seeing this idea through so I dont have any plans on giving up. I guess one of the good things I have going is an online shop already set up. I've made a few sales but Im wanting to go mobile and create a mobile art supply instead of using a traditional brick and mortar storefront. I'm trying to find a way to use my spouse's credit since she has great credit. I was looking at a personal loan but not sure.

 

[LostConnection]

Thanks for the advice guys. I do plan on seeing this idea through so I dont have any plans on giving up. I guess one of the good things I have going is an online shop already set up. I've made a few sales but Im wanting to go mobile and create a mobile art supply instead of using a traditional brick and mortar storefront. I'm trying to find a way to use my spouse's credit since she has great credit. I was looking at a personal loan but not sure.

As long as she is alright with it... and an option to consider is to bring her in to the business, even if as a silent partner.