My, My, Me, Me, Me

My, My, Me, Me, Me

By Rich Chanick, Center Director Small Business Development Center at Northland Pioneer College

While working at the Small Business Development Center at Northland Pioneer College one of our primary areas of emphasize is to assist new and growing businesses get funding. We have assisted companies get as small as $5,000 to several millions from banks, institutions, private investors and even family and friends.

This sounds like a diverse group but there is always something in common when a new or growing business is seeking funding. It can be a bank, a private investor or your Grandmother but everybody will want to know the answer to five basic questions. Business owner- don’t go looking for money until you can answer MY, MY, ME, ME, ME.

• How much of my money do you need? Be as specific as you can, $53,000 is a better answer than $50-$60K. Everybody will appreciate you being specific but your potential lender will know that you cannot foresee everything so “wiggle” room is allowed. “I need $53,000 to purchase equipment and supplies to open but I am seeking $60,000 to ensure that I have enough for contingencies.” Remember it is much more difficult (if not impossible) to go back to that investor for that last little portion if you did not ask for it in the first place.

• What are you going to spend my money on? Here it is important to be as specific as possible. $312 for a printer is a much better answer than $500 for some computer stuff. This is obviously not the time to give yourself a raise on borrowed money. Be prepared to get the lender/investor a list and how you determined the prices.

• How are you going to pay me back? This is actually the business plan. How is your new or growing company going to generate enough money to pay all of the bills, support the owner and have cash left over to pay the loan. The devil is in the details here. Even investors that claim they “don’t like digging into the numbers” want to see that you have done the digging and that it will work. After you have put this together step back and see if it makes sense. If you need to sell 50 pizzas on a snowy Tuesday night in February to survive even Grandma won’t believe it.

• When are you going to pay me back? If you are dealing with a bank or a financial institution you will not have flexibility on this and they will set the terms but if you are dealing with an investor or friends and family, you are free to work out what works for both of you. Perhaps loan payments can start in month 4 or higher payments in the prime months and lower payments in the slow season. Whatever works for both of you … works.

• How much are you going to pay me back? Again a bank or financial institution will set the terms but it is totally expected for you to seek out the best deal Different banks have different rates depending on the types of loans they are seeking. Find the best deal for you. If it is a private investment the return will again be what works for both of you. However, a rule to live by is “more risk… more reward.” If you are seeking to be in a business you know very little about you can expect high costs to get financing, if you can get it at all.

MY, MY, ME, ME, ME is all centered on what the investor or banker needs not on what you need. If you can keep the focus on their needs … you will get to your needs.

The Small Business Development Center (SBDC) is housed at Northland Pioneer College and is funded by NPC and the SBA to assist small business grow and prosper. Call 928- 532-6706 or register for our no cost, 1 on 1 assistance at our website

About the Author

Prior to working at the SBDC Rich Chanick was honored for starting one of the 500 fastest growing companies in the US by INC Magazine. In his next company he raised $4.5mm and had clients that included Disney and Royal Caribbean.

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