Financing: What I've learned so far

[G-Man]

I'm working on my first large equity raise right now, and it has been an eye-opening new experience. I plan to update on that when the deal is truly done.

For right now, I'm working on my 3rd ABS line with a bank, so thought I'd share a few things I've learned along the way. If anyone has more technical questions, if I can answer them I will, if I can't, well then, I can't

1. Start raising before you need it. If you think you'll be so big in 1 year you'll need more capital to service your customers, start working on your financing package now.
2. More is not always better. Don't think about just who offers you more money or a lower rate, think about the other terms and how they fit with the commercial realities of your business. Example: had to choose between a 4m line from one bank and a 7m from another. Bank 1 gives you 45 days to turn in monthly financials. Bank 2 gives you 15. You also know that you're going to being doing ERP implement and that it will effect your reporting time for at least the first half of the year. 4m you can use is better than 7m you can't.
3. Your banker is a customer. Show him the value added you provide, and make good on it. Report on time. Always. Be ready with answers to questions. Know your business. The trust factor with your commercial banker is very important. If it's there, this is someone that can be a huge ally in your future growth.
4. Be credit worthy. I don't mean have a good credit score. I mean manage your business to the level of accountability that is worthy of the trust someone else places in you by giving you their money, before you're actually on the hook for someone else's money.
5. Be a organized. Keep a log of all communications you have with bankers, what was said, what documents were sent, etc. There's nothing more frustrating than trying to answer questions and not knowing what the other guy is looking at. Knowing what they have and being ready with an answer before the question comes is a level of professionalism that will set you apart from most other small businesses.

GOOD LUCK!

PS. Would be awesome to hear some experiences others have had and what they've learned.

 

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[Niptuck MD]

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