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
1. Dreams Versus Reality
2. How Long to Expect for Different
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
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
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.
Long to Expect for Different Financing Options
3. Time benders:
Age of business. Loans to established businesses often
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
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.