Financing for a startup

man, sign, paper-5710164.jpg
>Getting financing for a start up business
Posted by: Mike Feb 6 2004, 01:39 PM
I was searching the web and came across your website. I have been trying to get an SBA loan but have been turned down on the basis that we are a new company. We are a “Home Theater ” company that would like to expand with new showrooms. At this point I do not know where to turn.

As a start up, we probably do not qualify to go public, correct ??? My other avenue was to send our business plans to some of the large retail chains to see what their interest would be in investing. So far, I do have one that is interested.

Do you have some advice that you can share.

If you would like to see our website it is


Posted by: loanuniverse Feb 6 2004, 06:50 PM

I saw the website, very sharp… I wish I had those kinds of designing skills. I am going to be of very little help in your situation as all of my employers have had it written in their “credit policies” that loans to startups were not the type of credits that they would pursue. This means that my knowledge of how to do one of these loans is next to none.

In fact, the only times that I ever did startups, the fact that the borrower was a startup had to be mitigated a lot by the strengths of the guarantors and the equity invested in the company.

You are correct about the option of going public being closed to you. In fact, I think that your approach of contacting possible investors is a good one. Furthermore, I think that maybe you need to reassess the plans. The following comments are off the top of my head, remember that I am just a credit analyst not an entrepreneur. As a matter of fact, the other day my boss and I were joking about how it takes a person averse to risk to become a credit analyst and how much we differ from business people. We always see the risks, while the businessman always see the potential and goes ahead in spite of those risks. While this is good because they get to reap the rewards, most times they will fail and suffer the consequences. Anyway, you didn’t come here to get discouraged so let me give you my feedback:

1- You mention that you want to open showrooms. Do you have even one showroom now? Is there a physical presence or just the website? Maybe the plan could be scaled down.

2- Using a scaled down plan, could you finance this with other sources of funds being that the funding requirement is lower?

3- Besides contacting potential investors, what other types of creative financing resources can be tapped? I know that it is risky but how much do you have in home equity? You got to look at all of your resources, any business loan that you get will have to be guaranteed by the owners anyway.

Hope this helps
Posted by: mgold Feb 6 2004, 07:50 PM
Thank you ! We have done a lot of work to make the website look sharp.

To answer your question. I have taken equity out of my house for our current showroom.

I actually have two corporations interested in investing. With the HDTV craze on the brink of exploding, I think these companies (both manufacturers in the consumer electronic industry) see the potential of what Home Theater Superstore could be in a few years.

I am not going to put all my eggs in one basket. If you or anyone you know can direct me toward a good venture capital company, the gesture would be much appreciated !

Have a good week end !

Posted by: loanuniverse Feb 6 2004, 08:04 PM
The idea of a Home Theater superstore does sound appealing. I have never been much for cutting edge electronics, but I can see that 2004 and 2005 will be the breakout years for this technology. But as I mentioned before, I see a lot of potential troubles ahead with one of the biggest being the existing competition. If for example the concept proved succesful, I can see big well capitalized companies in the industry opening a 15,000 sq. ft. store next to your 3,000 sq. ft. one.

Regarding venture capital, I can’t help at all. They deal with a whole different constituency that community commercial lenders do.

Good luck.
Author: Commercial Loan Underwriter