Traditional banks aren't only option for startup business assistance

No matter how phenomenal your business idea is, without some sort of financing it's likely impossible.

Whether you need funding to purchase a building to house your business, equipment to run it or working capital to keep it going, there are many financing options available.

Lenders warn, though, that would-be business owners should do their homework before they head to the bank.

Geoff Parker, vice-president at First Missouri State Bank, said potential borrowers need to understand that banks approach start-up businesses with some hesitation.

"Anyone starting a new business needs to understand that a start-up business in and of itself is risky. A high percentage of them fail," Parker said.

Before coming to the bank, loan applicants need to have a realistic business plan that details in's and outs of how it will operate, he said. People should also consider what their start up costs will be, anticipate any potential hazards and project what their profit and loss will be.

"Most people come to us with an idea as opposed to a well-thought-out, well-prepared business plan," said Kevin Greaser, community bank president at Alliance Bank in Cape Girardeau. "They're completely unprepared to sit down and deal with us because we're looking at the business side of things and for so many prospective business owners it's a very emotional thing."

When it comes to small business loans, no two deals are ever the same, Parker said.

"We look at each proposal on its own merits and a lot depends on the financial wherewithal of the applicant," Parker said.

Greaser recommends that people research their business idea extensively before approaching a bank. Working with an accountant, attorney and insurance agent as they plan their business is also important, as banks rely on referrals from these professionals.

The Southeast Missouri State University Center for Innovation and Entrepreneurship can also be a helpful resource for potential borrowers, he said.

"Banks will look at cash flow first -- how does this business make money? -- secondary is collateral," Greaser said.

In many cases collateral can be real estate, equipment or accounts receivable, he said.

For business proposals the bank considers higher risk, U.S. Small Business Administration guaranteed loan programs are used. SBA 7a Loans offer financial help for businesses with special requirements. For example, funds are available for loans to businesses that handle exports to foreign countries or businesses that operate in rural areas. The loan proceeds may be used to establish a new business or to assist in the acquisition, operation or expansion of an existing business.

ACCION Missouri, which opened last fall at the Center for Innovation and Entrepreneurship, lends to businesses that are unable to secure credit from traditional banks.

"Every deal we take a look at potentially has some issue with it. Maybe it's a startup, or individuals needing help with collateral, or they just have poor credit because for whatever reason they've had a hiccup in their past," said Craig Bohnsack, loan officer with ACCION Missouri.

Changes in the nation's economy have left some who find themselves suddenly unemployed, thinking perhaps now's the time to start that business they've always dreamed about.

"We're not finding manufacturers who are coming in and hiring large numbers of individuals. So individuals who are seeking employment are having to be creative, and they're creating their own job," Bohnsack said.

ACCION is a multistate not-for-profit microfinance company based in San Antonio. It offers startup loans up to $50,000 and loans to existing businesses up to $250,000.

For more resources and financing information for small businesses, visit semo.edu/entrepreneurship.