NxLevel: week 6

many a wise man (and probably woman) once sang, "money don't get everything it's true. but what it don't get, i can't use."  and as altruistic as one can be, especially since our NxLevel class just finished up a session on green business, an operation simply can't be very socially-responsible if it doesn't have enough money to keep the lights on.

i suppose if you can't pay the electricity bill you could tell your clients and customers you're just being environmentally friendly, but at some point you'll have to face the music: businesses need coin to sing and dance.

as with many continuing education courses, some of the material you learn is - depending on your perspective - a no-brainer. so in terms of a mini-business degree-like education via NxLevel, spending less than you make, practicing exemplary customer service and following through on your promises fall into this category. however, one of the most valuable lessons we've learned to date is that just because the financial situation of your respective start-up may look rather bleak, there are options that can help a small business secure enough funds to postpone failure for another year. ha! i kid, i kid...


tuesday night us NxLevelers joined the FastTrac GrowthVenture students and other participants for a special funding options panel designed to help entrepreneurs learn about ways to secure financing to get their businesses off the ground. the panel consisted of representatives from the Denver Office of Economic Development, a commercial bank, the non-profits Colorado Enterprise Fund and Colorado Lending Source and the financial services company Liquid Capital of Colorado.

other than the commercial bank, all of these sources have unique, creative methods of trying to get entrepreneurs the funds they need to help a budding (or already established) business succeed. before getting into specifics, we learned that one of the first questions a small business owner needs to answer - at least in terms of financing - is "equity or debt?". entrepreneurs (you/me/we) must decide whether they want to borrow money or sell ownership interests to equity investors.

the main advantage of borrowing money is that a lender doesn't have any say in how you run or manage your biz. and, more importantly, a lender isn't entitled to any of your profits once you hit the big time. just pay your loan back on time and all is well (owners can also deduct interest payments as a business expense). the disadvantage in borrowing is committing your operation to a fairly large business expense (i.e. loan payments) when cash is at its highest demand.

for whatever reason (bad/no credit, no collateral, no personal assets), a small business owner may find themselves unable to borrow money. as you'll read below, all is definitely NOT lost if you find yourself in this situation. one option for those of us toeing the line between entrepreneur and vagabond is finding people who want to invest in your business outright and become part-owners.

there's a good reason to accept money from equity investors: these funds can be spent on business start-up expenses rather than large loan payments. and unlike a loan, if your company goes belly-up it's unlikely that you'll repay your investors their initial investment as long you've thoroughly disclosed the risks involved in your biz.

however, the downside of having equity investors is often felt when business owners realize their new partners end up with a larger share of the company's profits than would a lender. and, since investors are co-owners, they'll have a legal right to be informed about how the business is being operated. they can also sue you if they feel you're screwing things up. yikes.

a second, and possibly MUCH better option, is to take advantage of the many micro-lending or alternative funding opportunities for start-ups and small businesses. there are specific loans for businesses with 10 employees or less and/or entrepreneurs with bad credit. there are programs like the SBA 7(a) loan program which are (for a limited time) 90 percent guaranteed by the federal government (which kinda helps when negotiating with a bank). the city offers "gap" financing for start-ups and biz expansions if you're located in specific target areas and can create some jobs. and, of the more truly innovative methods for lending options, there are accounts receivable and purchase order financing which allows you to borrow on inventory and sales history!

i've never been one to shower the financial community with many compliments, but did you see that exclamation point?

if you're in the market for start-up capital or any kind of small business financing, do yourself a favor and click through those links above. good stuff, truly.

-mc