So what do you do if you have a fantastic idea but no funds to back it up? If you have no real credit history and limited other resources (family, friends, venture capitalists, etc.) you may still qualify for a Small Business Association (SBA) loan program. They also have programs specifically for women and minorities as well.

The SBA doesn’t actually make loans though, it guarantees a portion of the loan (anywhere from 50-85%) to qualified individuals made by banks. Fixed and variable interest rates are available and based on lowest prime rate plus up to 2.75%. They do expect that loans be fully secured, however, they will not decline a loan because of insufficient collateral. They will expect that you pledge the assets you do have and personally guarantee the loan.

Before you go searching for loans, do your homework and see if there is an SBA program that is viable for you. Then make sure you have everything you need before you start applying.

Your business plan should include what resources you will need to accomplish your goal, your contribution, how much you expect to need, allocation of loan funds in the business, and how you will be able to pay back the loan. They also might need financial statements, tax returns, projected opening day balance sheet and twelve months projection of income, expenses and cash flow for startups.

A valuable resource for this process is SCORE, Counselors to America’s Small Businesses which provides free business counseling to U.S. citizens and legal aliens.  Many of the counselors are knowledgeable of the loan process and can get you started.

(photo courtesy of Shannon Cherry of BeHeardSolutions.com)

Post from: EveryJoe

Get the Money You Need for Your Startup

According to the Washington Post,  West Coast and Midwest regions are becoming even popular for VC.

In addition, VCs are investing more. In the US, VC investing grew from $1.2 billion in 2002 to $1.6 billion in 2007, an increase of 33 percent.

Post from: EveryJoe

Where are the venture capitalists?

News reports have shown giant corporations like Lockheed Martin, Boeing and Rolls-Royce have received small business contracting dollars after purchasing small firms with pre-existing government contracts. Until the rules changed in June, those firms were not required to change the status of those subsidiaries. Some estimate more than $100 billion were given to these large companies.

So the big question is: do you think this lawsuit will help the SBA reach out to small businesses?

Post from: EveryJoe

SBA sued over withholding information

“The mobile industry will be worth $50 billion in 5 years!”

“Advertising online is going to be worth $100 trillion by 2010!”

You can get this sort of data all over the place. Analysts put out reports all the time expounding the growing size of various markets.

The result is that many startups take this approach:

“If we only get 1% of that market, our company will be doing $5 million in sales, easily. And we’re being conservative. Just 1%.

I used to think that way. Part of me still does because it sounds so damn tempting and easy. But it’s the wrong way to think, and it’s the wrong approach for your business plan and pitch.

Let’s debunk the 1% Market Share Myth:

1. Market numbers are nonsense. At the rate things change in so many industries (and particularly technology) it’s almost impossible to really get a handle on the size and growth possibilities of various markets. Plus, when analysts talk about markets it’s often in vague terms, bunching things together that don’t necessarily belong, or certainly including companies and product offerings that wouldn’t compete against what you’re doing. “The online collaboration market is growing at 1000% per year!” Um…what the heck is the “online collaboration market” and what does it include?
2. You’re selling yourself short. Sure, 1% of a huge market could be a lot, but 1% is a piddly number. There’s a difference between being conservative (which is smart) and lowering expectations. Promoting the concept of 1% is lowering expectations and setting the bar way, way down.
3. VCs hate hearing this. If you’re going after funding, you’ll need a business plan. At minimum you’ll need a pitch. And that pitch is going to include sales estimates, market sizes, etc. Basically, you’ll throw a bunch of numbers into your pitch that will show VCs how much money you’re going to make for them. Truth is, they know the numbers are BS, but they have to be there anyway. What VCs hate is the “1% of market” argument. So if you’re looking for funding, don’t pitch it that way.
4. Getting 1% of any market is damn hard. The big fallacy about nabbing 1% of a market is that startup companies think it’s easy. “How hard can it be to grab 1% of a market? Plus, when we show that 1% of a market is worth so much money, it’s a no-brainer!” Grabbing any amount of a market is hard. Closing a single deal is hard. If it was really easy everyone would be doing it, and there goes your competitive advantage!

If you’re starting a new business don’t think about 1% of the market. It’s bad business in so many ways.

Post from: EveryJoe

The 1% Market Share Myth Debunked