Funding Success Story
by Dean Fishburn
Fishburn Violin Shop
We recently received $400k as a loan from a Small Business Loan source (the loan has been approved but not closed on); 75% secured by the SBA. $70k was funded by the leasor in the form of a build-out and a cash injection from us of $172k.
What we learned from the process of obtaining financing is this: It is VERY expensive to obtain a SBA loan. We suggest that you look into using your own money to start the business. One aspect of obtaining a loan through an outside source is that the process will get you very organized and will make you think through every aspect of your business plan. It also makes your business plan extremely important. Your business plan may look good on paper but this process of obtaining a loan with it will tell you if it will actually work in the real world.
When raising the money for a project, the business plan is everything. If it does not tell the lender that they would be a fool if they did not fund this plan, your chance of obtaining a loan will be very slim. Another aspect of the business plan is that it needs to clearly state how you will carry-out your business over the next five years rather than what you think the lender wants to hear. If the business plan is such that the author of it thinks "well after we get funded we can discard the plan and do business another way," they better read up on the bankruptcy rules, as they will probably need them. We have come to realize that the business plan, well written, will serve the business better than any other venue we could come up with. The business plan IS the business.
Everywhere we took our business plan the comments were,
- This is a wonderful plan, very well written.
- Not many plans submitted are this well laid out.
- I do not think we can fund this but since the business plan is so good I am going to present it to the committee anyway.
The reason we received the above comments was not because we are such business gurus. They were made because the business plan software we used (Plan Write Expert Edition) was that good. I am so thankful that we found it and used it. The business plan software could not have been easier or better for our purposes. The other aspect that was invaluable was, after we completed the plan using the software we sent it to Kylon Gustin, who fine tuned it. We feel that this was a very good decision on our part, as after we got the plan back, it just "read" better. Both were money well spent!!!
In the eyes of the lender, these points will be looked at very carefully:
- How long have you been in this business/industry?
- How successful were you in this line of work?
- Ability to fund 30% of your project.
- How impressive is the overall reading of your business plan?
- Do the financials make sense?
- If a specialized business, where will the business come from?
- Your personal information (credit history/rating).
If any one of these items are negative in the eyes of the lender, they probably will not consider the loan no matter what else is in your business plan. For example, one of the people at our loan source told me that they were considering a man for a loan. They called him to ask about where a few of his figures came from in his business plan. He stated he did not know and the consideration of the loan was ended at that moment. When his loan officer asked him why he said he did not know, his response was, "I was driving when they called and could not think." Believe me, if you do not "live" the loan process 24/7 you will have a hard time obtaining a loan.
We were told by our loan source that since our business is a very specialized business, the only thing that "sold" the committee on funding our project was the length of time and the success we had in our line of work. Again, all brought out by the way the software let us present our business. The business plan is everything!!
About our business: We are a violin specialty shop. We rent instruments to beginning string players in the schools. We sell accessories for all stringed instruments. We have a full stringed instrument repair facility, one of the best in town. We sell stringed instrument sheet music and method books. We sell intermediate and professional stringed instruments. For example we will have violins ranging from $2,000 to $30,000. We call on our accounts (public schools) on a weekly basis to meet the needs of the orchestra directors and obtain the beginner rental business.
We will open our doors on January 2, 2009. The first year our business plan is projected to make $750k, (yes, of course before expenses) with our third year projection being $1.5 million, and $2.8 million in year five.
As a final note: We are very excited about getting our business up and running. We know that our business plan was well written (thanks to BRS and Mr. Gustin) and we understand that if we follow this business plan we will be highly successful in a business that is our passion.