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The rewards of starting a business are many: You can enrich yourlifestyle, boost your self-esteem--hey, you're in thedriver's seat of that vehicle called destiny. While the highsof entrepreneurship are fulfilling, the realities can provebewildering. Take the contender for biggest buzz-kill (at leastwhen absent): money. Scott Fiore, 31, saw red a few times en routeto finding start-up capital for his Littleton, Colorado, naturalpharmacy, The Herbal Remedy. "Finding financing's prettysimple," says Fiore. Unfortunately, getting itisn't as easy.
Fiore's money hunt ensued months before his August 1998departure from Rosemont Pharmaceutical Corp. in Denver. Heinitially pitched his business idea to the bank he had his personalaccounts with at the time.To his delight, a representative toldFiore his idea looked great and that he could get a loan. To hisdismay, the rep tacked on "in a year." After learning hisbank doesn't offer initial business loans, Fiore was referredto the SBA--a popular option for new businesses seekingfinancing.
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 onlydifference, notes Fiore, is that the SBA deals with untestedbusinesses, while many banks don't.
Fiore contacted the SBA in May 1998, assuming its loanrequirements would be more lenient than a bank's. Routed to anSBA-affiliated bank in his area, he sent off his business plan forevaluation. After about a month, Fiore was contacted by his loanofficer, who told him additional information was needed. "Theyneeded such tremendous detail, it took forever to get straightenedout," he recalls. "And I thought mortgages werebad!"
The necessary information ranged from personal financial data toadditional herbal industry stats. So Fiore called on his old fratbrother, Ron Stock, with whom he had "interned" atStock's Dover, New Hampshire, store, The Herbal Path. "Thehardest thing was, we weren't an existing business. We [had] nohistory," says Fiore. "But Ron was willing to share hissales numbers to help us get a loan."
Supplying successful figures from a similar business as atemplate, 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 forincorporation (The Herbal Apothecary Inc.) to protect his personalfinances should the corporation dissolve, Fiore was miffed by theidea of putting everything he owned on the line. AlthoughFiore's collateral would be released two years into theseven-year loan term, he was well aware most start-ups headed forfailure arrive there within two years.
Enter dad, who visited for a weekend last July. Father and sonscheduled a meeting to see what additional properties (offather's) could be put up for collateral to get the initialloan. Fiore's father consulted his financial advisor, and theunbelievable happened: "[The advisor] worked some numbers andsaid `If we're going to sign for X amount, I can get a loansecured on [both] your investments way cheaper than what you'regetting [from the SBA] for the same length oftime,' " says Fiore.
Ever the savvy entrepreneur, Fiore took the advisor's betterdeal through a Phoenix-based bank, winning himself a variable, butlower, finance rate (he paid 7.5 percent the first month, comparedto the SBA's 11 percent) and a firm grasp on his belongings.Fiore originally estimated needing $170,000 but came out underbudget, requiring only $115,000, which he receives in installmentsbased on need.
So remember this: Persistence pays the bills. (Hey, it may beclichéd, but it's better than "Every cloud has asilver lining.")
Contact Source
The Herbal Remedy, 151 W. Mineral Ave., #106, Littleton,CO 80120, http://www.theherbalremedy.com
