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Idea Cafe's CyberSchmooz
Financial Feasts

Financing message forum where you can get and give insights found nowhere else. Belly up to the table and request funding. Or tell your money tales. Any money talk is fair game except ads.

The Latest Hot Topics:

Show Me the Money!
Belly up to the Financial Feasts table and talk turkey about money... what to look for, where & how? All money talk is fair game. Go

 

How Long Will It Take?

Understanding the Time Frame

Timing is one of the most mysterious elements of small business finance. Most people underestimate the time it takes to get a company financed, especially a new business. This leads to anxiety and frustration. Understanding the realities, instead of the dreams of financing can help you prepare, emotionally and financially, for the time period between starting your money search and having the money in the bank.

1. Dreams Versus Reality

2. How Long to Expect for Different Financing Options

3. Time benders

4. Idea Cafe Tips

1. Myth Versus Reality

Myth #1: I'll get my financing any day now.
Reality: Few will tell you this, but months, even years may go by before you locate the amount and kind of financing you want. It takes a while to get all the right documents together to even begin the financing process: your basic financial package, your business plan, and a list of appropriate financing prospects. You'll find yourself spending a lot of time making telephone calls trying to find financing contacts and then setting up appointments to see funding sources.

Financial institutions, Uncle Sam, and even Uncle Stu need time to make up their minds after reviewing your business plan, weighing the risks, and just getting around to your plan in the stack of business plans on the desk. Remember, you're still building expertise at wooing and choosing investors: That $200,000 in seed money you took a pass on six months ago looks pretty good now that you've learned bankers won't fund your brand new company.

Myth #2: I'll make money on schedule.
Reality: You spent a ton of time budgeting your personal and business expenses, crafting a business plan, and mastering financial statements, but every entrepreneur encounters surprises. Modeling your profitability projections on industry averages may add a dose of reality, but it's no guarantee you'll reach the same goals. Building a client base for a business is a slow and largely unpredictable process. And unforeseen events are the stuff real lives are made of.

Myth #3: I know a lot of wealthy people -- they'll invest.
Reality: So the guy who works out at your health club is always telling you about his investments and how he's looking for the next big thing. Call him anytime, he says. But when you do, he's less than excited. And your rich uncle Bob who said you could always call on him, tells you please don't call again. The reality is that people who talk big when there's no proposal before them can get extremely serious when it finally comes time to fork over the dough. Don't be surprised that the big talkers aren't very quick to pull out their checkbooks.

Myth #4: Everybody else has had trouble with this concept, but I'm different because I'm better.
Reality: Every entrepreneur thinks he or she is special: they've got the best concept, product, execution. And indeed, you may be special. But the financing community is unlikely to recognize your uniqueness as quickly as you think they should. If you're in an industry or business that has had trouble getting financing before, expect to have trouble getting financing too.

Myth #5: I'm in a hot industry; I'll get money right away.
Reality: Just because your industry is hot, doesn't mean you are. Funders are still going to give a good, hard look at your business plan and your management capability. In a hot industry, you'll be up against a lot of other people looking for money with similar products or concepts. The competition for investors may be just as tough as in a slow period.

2. How Long to Expect for Different Financing Options

3. Time benders:

Age of business. Loans to established businesses often move faster.

Amount of loan. A smaller loan gets approved faster, all else being equal, and if the lending institution makes small loans.

Complexity. Quirky or new technology businesses can take longer to get approved. Unusual businesses will take a longer time to find investors.

Specialization. Expect quicker turnaround times from small banks or banks with small business divisions. If you choose a venture capital firm that specializes in your industry, you may get a quicker review.

4. Idea Cafe Tips

Imagine your weatherman said you'd better get ready for a long winter... You'd stock up on extra food in the pantry, extra wood for the fireplace, candles and good books to keep body and mind going even if you're snowed in longer than expected.

Well, get ready for the process of getting money in the same way, for it'll probably take longer than you imagine, so just be prepared. Have extra cash stashed away, other ways to make a little income while you're waiting, and plenty of stamina to fuel those efforts you'll have to keep making. But not to worry -- even after the worst of winters, spring always comes.

 

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