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Here’s One Question Never to Ask When Seeking Funds

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“If a banker asks how much money you want to borrow, and you respond ‘how much will you give me?’ you’ve just disqualified yourself,” Madeline Marquez, VP at the Business Initiative Corporate of New York, told an audience of 200 at the Javits Center, as part of a panel discussion on how start-ups should access capital for their business.   It shows you haven’t done your homework, you haven’t prepared, Ms. Marquez explained.   She advised audience members who may be seeking SBA-guaranteed loans to start by filling out the SBA form 912 for key management, and the SBA form 413 if you are checking out different banks.

Moderator Steve Cohen, SVP with Empire State Development, led off the panel discussion with a review of various New York State programs and resources to fund and support entrepreneurship.  Programs mentioned by Mr. Cohen included the following:

Ed Lynch, VP and Credit Relationship Manager for Flushing Bank said that loan seekers need to submit a business plan which should address the following:

  • Sources and Uses of Funds
  • What % equity will they put in to purchase equipment, working capital, real estate
  • How are they going to repay the loan
  • If an existing business, what is the company’s history
  • What is the past background of the principals, and why are they going into this particular line of business
  • Detailed description of the product/service
  • What is the revenue model, what is the customer base, and the demographics

Finally, Dan Vacarro, VP of the NY Business Development Corporation rounded out the panel, mentioning that he pays special attention when loan applicants are passionate about their business.

 

 

 

 

 

 

 

Stylitics wins 2011 Wharton Business Plan Competition

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Stylitics won the Wharton 2011 Business Plan Competition, beating out seven other finalists for the grand prize of $30,000 in cash and $15,000 in legal and accounting services.   The competition, which is open to any student of the University of Pennsylvania, began in the fall of 2010, with 210 contestants.

Stylitics motivates customers (with gifts like reward cards) to log what they wear on a daily basis, thereby capturing up-to-the-minute insights that it hopes will make it the “Nielsen for clothing.”   The company has developed a “new generation” of tools that can track and analyze actual offline clothing and purchase behavior.

Stylitics was judged to have the “most viable business plan.”    Obviously  a business plan is needed to win a business plan competition, and is also typically required to raise capital from outside investors, but how about a company that is able to self-fund, is a business plan still important?

Using Stylitics as an example, they believe there are 50,000+ clients for their services in the United States, and that at an average revenue of $5,000 per client, they have the potential to be a $95 million revenue company by 2015.   In the process of creating a business plan for Stylitics, one of the key questions that would need to be answered is: “what marketing strategy and tactics, and at what cost, is needed to build awareness and trial of our site among these 50,000 potential clients, in order to put us on a growth curve that gets us to the $95 million revenue level by 2015?”   Estimating this early years’ marketing budget is key to estimating the needed initial capitalization.

Although a self-funded company would not need a formal 25 page business plan write-up, it would still need to know how much it has to self-fund.   Therefore, the problem solving, decision making and disciplined planning that goes into answering questions like this all can be essential elements of successful start-up businesses, even if the end result is not a 25 page comprehensive business plan.