The Small Business Loan Myth

March 1, 2018

 

As a business consulting firm and educational workshop platform for businesses, we have encountered an underlying theme that needs to be addressed. Namely, most small businesses think all they need is seed money. Today, we debunk this ideology, and talk straight.  

 

First and foremost, most accelerator programs in the market are linked (either directly or indirectly) to lending institutions; as such, the messaging gets muddled. We need to pull back the veil of uncertainty, and speak in plain terms.  

TRUTH:

 

If you haven’t been in business for at least two years and can’t show growth, then forget about small business loans.

 

SBA Loans & Accelerator Programs

 

There are three primary loan avenues for small businesses: 1. Micro-Loans, 2. Angel Investors, and; 3. Venture Capitalist.  

 

1. Micro Loans

 

These are usually set asides for mom and pop shops. Usually you’re required to show the following items:

 

  • Comprehensive Business Plan

  • Measurable Data

  • Profitability

  • Ability to repay a loan

 

Micro loans are provided, in most cases, by non-profits that borrow from the SBA (Small Business Association) and/or other micro-lenders to spread their risk margins.

 

As most likely obvious from the required metrics, most small businesses do not qualify for such loans. As such, an alternative provided by these non-profits is coaching and training. These accelerator programs are usually classroom based. Certificates are provided to show completion, and it goes some way to securing a subsequent loan.

 

2. Angel Investors

 

Angel investors are seeking equity in your business in exchange for securing a loan. Angel investors will sometimes aid in the startup phase, seeing as they have an interest in your business, but they also have clearly demarcated exit strategies that ensure ROI (return on investment). Additionally, interest rates are high with short repayment periods.

 

3. Venture Capitalist

 

Think shark tank. Large market business platform with clear scalability.  

 

So be honest about where your business is, and know that securing funding for your great idea is a pipe dream. You need to show substantive work product outputs to have a stake in the marketplace, i.e. you need a viable collateralized vehicle to secure funding. If your business is not profitable, you have no collateral. If you don’t have a comprehensive business plan, you have no collateral.  

 

The Good News

 

Building your brand and expanding your reach should be your primary objective. Learn your market, how to scale your business and how to manage everyday business operations. Take the time to work quickbooks and create ledgers that make sense for your CPA. Take the time to work out methods to get your product to your clients more efficiently and effectively. Build the relationships in your industry to grow.  

 

Basically, GET TO WORK!

 

Need guidance in creating the platforms for your business to scale? Contact SOYD today, and #stayonyourdaily.  

 

ABOUT SOYD

As a comprehensive consulting firm focused on business development, SOYD is committed to providing the necessary platforms and deliverables for your business. SOYD has a proven track record for growing businesses, formalizing deliverables and educating business owners on day-to-day operations. 

 

Subscribe to our weekly newsletter, via our Homepage, for free information pertaining to small business growth, job postings and all things Daily.

 

Have you started a business, or thinking about starting one? We have the only workbook you'll ever need to get you started and help you grow. Get your copy of SOYD presents Better Business Practices on Amazon today!

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