Elise is excited. Literally bouncing up and down as she walks, she turns to her mentor, Dave, and exclaims, “This is it! They are really going to give me the money I need to start.”
“Nope,” Dave states flatly without breaking stride.
“What do you mean, “nope”? You heard her. 25 grand is below even their average startup loan. My business plan is clean and my numbers are good. She said it was in the bag, just pending approval by the board.”
“I know what she said, kiddo. She lied. They are never going to give you 25 thousand dollars. I figure they are good for four to six grand, tops.”
This number deflated Elise’s excitement instantly. “I don’t understand.”
“Look, she is an advocate. It is her job to get excited about your project. It is her job to line up your information and tell them that you are a good risk, worth loaning money to. The board’s job is to take her argument and tear it apart, systematically reducing it to the bare bones reality of loan for collateral. You are allowing a lien against a few grand in collateral and your stock, which, while priceless to you, is worthless to them because they have no way to sell used clothes.”
“But…but they are supposed to be a non-profit. Their whole purpose for existing is to energize small local business by providing loans. How the hell are they any better than a bank if they still only think about their own bottom line?”
“They’re better than a bank because a bank would not even loan you that much, given your age and lack of credit. Look, their mission statement can wax poetic about the energy of young entrepreneurs, and “vision”, and trusting in the “character” of their applicants, but board that makes the decisions will never meet you. They don’t give a damn about your character. They are all old businessmen, used to thinking and making decisions like businessmen.”
“Why did you even take me to that place if they are going to be so tight-fisted?”
“Because in a few weeks they are going to call you and give you several thousand dollars, which will be several thousand dollars more than you would otherwise have. The interest rate is going to suck, but not nearly as much as the credit card debt that you will no doubt accumulate before this is all over.”
“But…this sucks. It took days to make the appointments, fill out the paperwork, and arrange that meeting. I just gave them rights to all my collateral. And for all that, I only managed to knock out, what, a sixth of my fundraising target?” Elise slowed to a stop, feeling a knot begin to form in her stomach. “Is this hopeless? Do I have any chance of putting together that much money?”
Dave stopped as well, turning back to face her. “You get discouraged way to easily,” he chided with a smile. “Yes, raising money is the hardest, most frustrating, most humiliating part a business start-up, but it is not impossible. Money attracts money. The more you have, the easier it gets to raise more. Stick with me, kiddo,” he insists, throwing his arm over her shoulders. “I’ll get you through this.”
Next week: Multitasking
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