The rewards of starting a business are many: You can enrich your lifestyle, boost your self-esteem--hey, you're in the driver's seat of that vehicle called destiny. While the highs of entrepreneurship are fulfilling, the realities can prove bewildering. Take the contender for biggest buzz-kill (at least when absent): money. Scott Fiore, 31, saw red a few times en route to finding start-up capital for his Littleton, Colorado, natural pharmacy, The Herbal Remedy. "Finding financing's pretty simple," says Fiore. Unfortunately, getting it isn't as easy.
Fiore's money hunt ensued months before his August 1998 departure from Rosemont Pharmaceutical Corp. in Denver. He initially pitched his business idea to the bank he had his personal accounts with at the time.To his delight, a representative told Fiore his idea looked great and that he could get a loan. To his dismay, the rep tacked on "in a year." After learning his bank doesn't offer initial business loans, Fiore was referred to the SBA--a popular option for new businesses seeking financing.
But Fiore soon found the SBA route was paved with preconceived (and misconceived) notions. "[Don't] go to the SBA with [the idea that] they are impartial and don't need collateral, because that's not the case," he warns. The only difference, notes Fiore, is that the SBA deals with untested businesses, while many banks don't.
Fiore contacted the SBA in May 1998, assuming its loan requirements would be more lenient than a bank's. Routed to an SBA-affiliated bank in his area, he sent off his business plan for evaluation. After about a month, Fiore was contacted by his loan officer, who told him additional information was needed. "They needed such tremendous detail, it took forever to get straightened out," he recalls. "And I thought mortgages were bad!"
The necessary information ranged from personal financial data to additional herbal industry stats. So Fiore called on his old frat brother, Ron Stock, with whom he had "interned" at Stock's Dover, New Hampshire, store, The Herbal Path. "The hardest thing was, we weren't an existing business. We [had] no history," says Fiore. "But Ron was willing to share his sales numbers to help us get a loan."
Supplying successful figures from a similar business as a template, however, wasn't enough--the SBA wanted collateral. Says Fiore, "When it came down to it, they wanted my house, both vehicles, plus additional property--and [my wife and I] didn't have anything else." After already putting down the $20,000 he'd saved to fund initial expenses and pay for incorporation (The Herbal Apothecary Inc.) to protect his personal finances should the corporation dissolve, Fiore was miffed by the idea of putting everything he owned on the line. Although Fiore's collateral would be released two years into the seven-year loan term, he was well aware most start-ups headed for failure arrive there within two years.
Enter dad, who visited for a weekend last July. Father and son scheduled a meeting to see what additional properties (of father's) could be put up for collateral to get the initial loan. Fiore's father consulted his financial advisor, and the unbelievable happened: "[The advisor] worked some numbers and said `If we're going to sign for X amount, I can get a loan secured on [both] your investments way cheaper than what you're getting [from the SBA] for the same length of time,' " says Fiore.
Ever the savvy entrepreneur, Fiore took the advisor's better deal through a Phoenix-based bank, winning himself a variable, but lower, finance rate (he paid 7.5 percent the first month, compared to the SBA's 11 percent) and a firm grasp on his belongings. Fiore originally estimated needing $170,000 but came out under budget, requiring only $115,000, which he receives in installments based on need.
So remember this: Persistence pays the bills. (Hey, it may be clichéd, but it's better than "Every cloud has a silver lining.")
The Herbal Remedy, 151 W. Mineral Ave., #106, Littleton, CO 80120, http://www.theherbalremedy.com