Think just because you're a startup, you have to take the first bit of financing that comes your way? Not so, says Chris Lehnes, vice president of business development at the CIT Small Business Lending Corp. based in Livingston, New Jersey, Lehnes shares tips to help startups navigate the scary world of financing.
Entrepreneur: what should a startup entrepreneur look for in a good lender?
Chris Lehnes: It really depends on what's important to you and what you're pursuing. You need to find a lender that's going to consider startups, because a lot won't. Think about what's important to you as a business owner. Are you looking for the lowest down payment possible? The lowest monthly payment? Are you looking for a lender that can help you expand and maybe open one of many locations for your business? You also want to consider aspects such as industry expertise--maybe you're doing something that's specialized, and not every lender would necessarily do a good job for you.
What are some common mistakes entrepreneurs make when choosing a lender at startup?
Lehnes: Just going with what they think is the easiest route. For example, we get calls all the time from entrepreneurs who funded their businesses with credit cards [and got into serious debt]. Similarly, people will go through a leasing company, but the lease terms can be very onerous, so read the fine print. Swiping the credit card or just writing a check out of your home equity line seem easy at the time, but could have serious repercussions down the road.
While securing startup financing, entrepreneurs can often give off an air of desperation. how might that attitude be damaging?
Lehnes: It can get you into real trouble. For example, locking into high interest rates or very high monthly payments can really affect your cash flow. That's why it pays to do a little research, speak to a few lenders--not just take that first loan that comes along. You might need to take a step back and maybe postpone a project until you get the financing that makes sense, because that might increase the odds of success for your business.
How can you find out what good loan terms are?
Lehnes: The SBA and SCORE can tell you what you might not think about and what to look out for while selecting a lender, so they're great resources if you're not even sure where to start or what questions to ask.