Startup funding-our bank experience

Business, and small businesses especially, are at the mercy of their banking providers. And no – it doesn’t seem to matter who you are banking with in this day and age or what country you are in, except maybe China!

Since the recession hit us towards the end of 2008, the ability to get financing appears to be virtually impossible unless you have a proven revenue stream, have been banking with them since the dark ages and are willing to put your children up as collateral.

This picture was drawn by my eldest son and relates to his teacher (who is actually a very nice lady!) but I felt exactly like this while trying to get the initial funding to build MyProjectTracker. My bank was giving me the whole “its the internet and too risky” excuse – in all reality, I just think these people are operating in the 20th not the 21st century. Where do they think most business is going to be conducted from? (deep breath, deep breath…)

Even leading lights in their area of expertise find it difficult to achieve cash-flow or other funding. Successful in their own right along with a proven business model the ability to borrow has been curtailed to a ludicrous degree. Ok – so the recession was borne out of irresponsible lending practices, but we seem to have gone from one extreme to the other where any degree of risk is seemingly too much.

Government sponsored lending does not help either. Bureaucracy and protection for the tax payer inevitably creates a stifling of credit into the business sector and a consequential continuation in the rise of business running into difficulty.

What happened to our bank managers?

These were the people (not too long ago) who you built a rapport with and who had the power to make a decision as to whether you would/wouldn’t get that loan. They understood who you were and what you were about. Now, a nameless face in head office who doesn’t know you from Adam gets to make the decision. This is not the fault of the people you meet in your branches or indeed your bank manager who almost certainly would like to lend you the money (all things being equal), but of the corporate banking world as an entity and the regulators who govern it.

So what can the Entrepeneur do?

You could say “I’ll fold” and many feel it is right to do so. But for those who want to make it work this is how we approached it;

1. Shop around – if your bank won’t, maybe the next one will. We found one that was willing to give us a go.
2. Work in your “day-job” as long as possible.
3. Fund the business yourself. If you put your own money in, it is seen as a positive sign that you have conviction to make it work.
4. Get a VC or business angel involved. There is no right or wrong time to do this. The earlier you do, the more of your business you will give up though. We are looking at this option now.
5. Try your local governement agencies – you never know your luck!
6. Ask family (though this can be more fraught with peril than any other finance source!)

The most important thing, as a start-up, is to not get deterred. If you have belief and conviction, anything is possible.

It took us 18 months to get sorted out – but here we are, just about to launch in the biggest recession since who knows when. Persistence and self-belief have paid off so far and we are confident that we will continue along our road.

How did you fund your start-up? Any lessons along the way?