In February 2014, Imagination Network attendees learned “where” to find money, some of which include: SBA loans, revolving loan funds, microloans, crowdfunding, and angel investors. The May and June meetings continued with the theme of money by showing “how” to better prepare yourself and your business when trying to get money or capital.
On May 13th, an entrepreneur, a facilitator, a business plan judge, and an innovator shared tips and templates to help make building a business plan or model less daunting. A business plan is one of the key first steps when accessing capital. It is your opportunity to provide information on your business and address questions that bankers or investors will ask.
When building a business plan, you need to begin with the END in mind. What are you doing and why are you doing it? If seeking capital, what specifically do you need funding for: tools, equipment, real estate, etc.? The business plan helps you learn more about yourself, your markets, your product/service, your finances, and how your business will be structured.
Where do you find business plan templates? What should you include in a business plan? The Small Business Administration offers a great free tool or template (www.sba.gov/tools/business-plan/1) that helps you assemble your plan.
When building your business plan, you need to include well thought out financial assumptions based on good market research. Verify that a need exists and that you’re targeting the right market segment. What solution are you offering? How will you take that product/service to market? What are your pricing and distribution strategies? A new tool that can help you obtain solid market data for the business plan is the Business Model Canvas (BMC). The core of this model is customer development and validation through surveying and interfacing with potential customers of your product or service. For more information on the BMC, check out http://www.businessmodelgeneration.com/book.
Once you have your business plan created or updated, your next step might be to get money in order to start or expand your business. But how do bankers assess your credit worthiness? The banker panelists at the June 10th meeting shared what they look for, including the 5 C’s of credit:
- Character: If a borrower is generally reliable and has shown they can follow through on their promises, it would lead a banker to believe they would follow through on repaying a loan. A banker is looking for a resume, business plan and personal guarantees.
- Credit History: What’s your past payment history? What is your FICO or credit score? Make sure to disclose all debts even personal loans to private individuals and land contracts that may not show up on the credit bureau.
- Cash Flow: Cash is the only thing that can pay back a loan. Revenues, gross margins and accounts receivable are not cash. Make sure to understand the timing of things and how it impacts your ability to manage your payments.
- Capital: This is the money you personally invest in the business; your “skin in the game”. Banks are requesting a higher percentage down than in the past.
- Collateral: Collateral is the bank’s secondary source of repayment should the plan not work as projected. It can include real estate, equipment, vehicles, inventory, etc.
Some key takeaways from the June 10th banker panel include:
- get your house in order (be reliable, pay your bills, have a good credit history, know your finances);
- cash flow is critically important;
- under-capitalization is the cause of most business failures; and
- build a relationship with your banker early (even before you need money).
The May 13th Building a Business Plan/Model panel included: Doug Sabel, entrepreneur and owner of Sabel Mechanical; Tom Avery, facilitator/mentor at Ripon College Creative Enterprise Consultants; Scott Dell, CPA, Asst. Professor at Marian University & Governor’s Business Plan Contest Judge; and Jay Smith, innovator and CEO of Draiochta Labs. Participating in the June 10th What Do Lenders Look For panel included: John Sullivan, Bank of Oakfield; Kathy Schwandt, BMO Harris Bank (Ripon); Dan Hintze, National Exchange Bank; and Loree Shady, Hometown Bank.
Imagination Network is a free Inventors and Entrepreneurs Club that is open to all and meets every second Tuesday of the month at the Elks Lodge, 33 Sheboygan Street, Fond du Lac, WI. It’s a great way to connect with and learn from peers and other resources in a fun, supportive environment. Relaxed mingling begins at 5pm along with dinner and drinks available for order. The meeting starts at 6pm and usually lasts around 2 hours.