Small Business Loans - Private, Government..?

[A790]

Hey guys and gals;

The time has come for me to begin aggressively expanding my business. First, let me clarify that I don't do any MLM crap so please don't post that crap in my thread. I'm looking for serious comments please, thanks :)

I run an online marketing company and have done so for the last two years or so. At first I ran my own ads for profit, but now I do a mix of private ads for myself and for local/Canadian businesses. At the moment I'm at capacity in what I'm capable of doing on my own, so after a fair bit of thought I've decided that it's time to open an office, hire some employees, and begin to really expand.

However, I'm not sure what the process for applying for government sponsored business loans/private loans is and whether or not the "credit crisis" is going to affect it at all. I have a business plan written up that sums up the majority of what it is I plan to be doing and the process that I'm going to go through to accomplish it.

However, I figure I'm going to need at least $500,000 in working capital just to launch properly. I know that I can be profitable right from the get-go and can likely have that loan paid back in under two years. Right now, with tax season just around the corner, I can't dedicate a huge amount of funds like that of my own capital. Plus, I don't have $500K kicking around.

Has anyone applied for business loans before, either through the government or a bank? What should I be looking for or be aware of?

Thanks in advance :)

[core_upt]

I've applied for a small loan through the Business Development Back of Canada, and even though it was a few grand to get my band on tour, they required full business plans and at least three meetings.

Given the credit crisis, I wouldn't even bother with the banks. Try private equity firms or investment angels.

I don't have anything in terms of leads to chase, but I can tell you to have a damn solid plan in place with your proven track record/real results and a solid plan for how much money you need and why. Consider hiring a consultant or outsourcing your business plan if you haven't done one before. It is the resume for your company.

[Mckenzie]

Keep in mind with that kind of money coming from an angel investor / private equity you will need to be presenting audited financial statements as well and opening up your books to auditors to look at.

Just wanted to give you a heads up as that will be an extra cost / requirement to you.

[TomcoPDR]

Question answered in PM

[canadian_hustla]

PM'd

[Carlton]

Banks are giving out money right now. At the moment, it would be a good time to go get a loan.

[autosm]

They might lend you 500k if you have 750k in assets to let them secure it against.

Its going to be tough to get anything right now.

The BDC might do it but again its going to take a solid plan and lots of security.

[A790]

I have no security to offer at the moment aside from my vehicle and some capital. I was hoping for more of an investment than a secured loan.

Looks like I'm going to have to seek private investors.

[liquid1010]

Private Equity may be your best bet in this situation. I have a friend who works as an account manager at the BDC, and he mentioned they like to focus on companies with securable assets..... so if your company is based in marketing, that will be a tough sell (higher risk on their part).

Are you looking at selling equity in the company, or simply taking on debt? Most PE investors will want a slice of the pie if you want them to pony up $500k. Are you open to that?

[lint]

dragon's den

[googe]

that amount is too small for VC, and you aren't solid enough to satisfy an angel investor. plus, they don't want you to pay them back, they want you to pay them back 10 times over. its super high risk, if they give you 500k, they want to see 5 million in their pockets within a few years. no security, so bank isn't an option. your most realistic option is probably making rich friends. or, go a different route that doesn't require so much capital. for starters, you definitely don't need an office yet.

[Graham_A_M]

Originally posted by lint
dragon's den

They'd rip you a new asshole. :nut: those guys want big percentages of business ownership unless you have the next best invention since sliced bread. I love that show though, I sure learn a lot from them. I love Brett Wilson, Calgary energy giant, I like him the best, him and Robert. Kevin is a total asshole, but its fun to watch his perspective on things.

I'd say, see what your personal bank would say, and go from there. (given your bank isn't RBC *shudder*)

[A790]

Well, that's the thing that I'm in. I need employees. I need 3 or 4 full time web developers, a programmer, and some space to make it all happen. A lot of what I do right now is limited by my inability to simply get more done in a day- waiting on outsourced content, websites, scripts, etc. is taxing my ability to generate revenue.

I do have a business model that is proven and sustainable. What I lack are the financial assets to scale it suitably.

[S4maniac]

If/when you approach your prospective angel investors, be prepared to answer the questions:

- who's your customer and why are you sexy? What makes you special?
- how much revenue/growth/rate do you currently have?
- whats your current burn rate? How much you losing a month?
- how many different customers?
- when's cash flow positive?
- when's profitable?
- are you going to need to raise more after this?
- how much of your company am I getting for investing $500k?
- whats your/my exit strategy (most importantly mine)?
- this might come up ... are you willing to go public?


In the end, the valuation of your company is what you'll need to justify.

There are angels in Calgary. Most importantly you'll need to sell how your vision of your company in 3 and 5 years. That vision better include massive growth.

Best of luck to you.

[A790]

- who's your customer and why are you sexy? What makes you special? Ad networks.
- how much revenue/growth/rate do you currently have? Approximately $800,000 revenue/yr, growth is currently 150%/yr.
- whats your current burn rate? How much you losing a month? Profitable. ROI is around 120%.
- how many different customers? Thousands.
- when's cash flow positive? It is already.
- when's profitable? It is already.
- are you going to need to raise more after this? No.
- how much of your company am I getting for investing $500k? 22%
- whats your/my exit strategy (most importantly mine)? Sale to Google :D
- this might come up ... are you willing to go public? Absolutely.

Haha, in all seriousness, thanks a ton for the advice guys and gals. I have some good leads for the new year and am currently working on a more streamline b.plan/proposal.

[S4maniac]

If what you wrote is true (and I have no reason to doubt you), then you should only give up equity as a last resort. With rev's like that you should at least qualify for some type of operating line. Running your receivables through a lockbox type account would probably give you some operating line room.

Managing organically controlled growth would also help you from imploding by growing too fast. You don't need all $500k tomorrow ...looks like you need $25k-ish a month.

[A790]

Originally posted by S4maniac
If what you wrote is true (and I have no reason to doubt you), then you should only give up equity as a last resort. With rev's like that you should at least qualify for some type of operating line. Running your receivables through a lockbox type account would probably give you some operating line room.

Managing organically controlled growth would also help you from imploding by growing too fast. You don't need all $500k tomorrow ...looks like you need $25k-ish a month.
I want 500K to set up shop and hire employees/purchase equipment/etc. If I waited for my cash reserves to build I'd be waiting at least another 2 years and I don't want to do that.