We’ve all heard that it is smart to tap into OPM capital to help grow your business. OPM* other people’s money that is. When you combine yours and smart capital, your capacity to grow your entrepreneurial business and take advantage of creative opportunities in your small business could jump by leaps and bounds. There are many different types of smart capital, including brainpower, which I am a huge fan of for entrepreneurs. Smart advisors, combined with the right credit, are some of the most valuable assets any business leader can leverage.
What if your credit is not perfect?
What if the banks are not lining up to throw money at your idea?
What if they don’t even answer your calls?
Yes, it has happened to every entrepreneur and I have experienced the pain of not being a bankers sweet spot in my early years, as well as after I sold my business. You can change your credit score and you can change your opportunities for loans when you understand the important basics. You need more than one source of repayment and you need a track record of successful positive cash flow of at least two years (or guarantors with one).
Remember not all banks and lenders are created equal. Get to know your local lenders and ask your CPA and your insurance agents who their favorite lenders are. Getting referred in never hurts the business owners who are proactive about building a strong company. Developing the banking and lending relationships early on in your growth will help you adjust, if necessary, to stay within the requirements and loan covenants.
Most banks will take your request for a line of credit more seriously when you are a depositor with them. As Laurie Leighty, co organizing founder of American Riviera Bank, recently told us in her interview, the banks need your deposits in order to lend it out. So start with your own bank and she says look closely at your Community Bank.
You can also look at other places to raise seed capital or find creative financial products which can help you. Now lets talk a little about loan guarantees, for yourself and others on your behalf. It always helps to have a “big sister or brother” or great uncle with deep credit power. How about Uncle Sam?
One such product is an outside source for Loan Guarantees. Most people are aware of the SBA Loan Guarantee Programs and many run from them fearing time to complete a loan combined with government red tape. I learned recently about SureFire Capital, a company which can provide lenders with a loan guarantee via Letter of Credit from a major, Schedule A bank. The idea here is to enhance the lending bank’s collateral or security position and enable it to lend to excellent businesses that generate cash flows but may be slightly too-light on collateral.
The CEO, Ariel Shlien, told me that they want to help great companies who might be just 6 – 12 months away from having enough collateral on their own, but who can dramatically benefit from a loan today. Here is some of the criteria:
Established, growing, asset-light businesses with strong historical cash flows, excellent management, consistent performance and a sticky customer base who come back over and over again.
These are strong, high-quality businesses that make money and can easily service debt – but who lack enough tangible security to satisfy the bank.
Examples might be businesses in the IT, SAAS, Services, Financial Services, Intellectual Property, Franchising, Distribution, Niche Manufacturing, etc… but they tell me that they have seen great businesses in other areas and are truly open if the above criteria fit.
A passionate. experienced, outstanding and motivated owner/management team seeking the following:
– Acquisitions or roll-ups
– Growth capital
– Expansion into new markets
Sounds intriguing huh? You would need to enter into a contract with any guarantor or lender. In this example above there are benchmarks and performance agreements that you will need to make with both your lender and the loan guarantee corporation.
In some cases www.surefirecapital.com will take equity in high potential growing companies. Please connect with a representative for full details and have your attorney review any agreements, particularly when dealing with lenders, venture capitalists and investment bankers. Those are choppy waters and you want to ensure that you have good, objective legal counsel before jumping in.