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By Paul Tulenko

A reader asked: "Where can I find money to expand my business? The downturn has opened up a seasonal opportunity for me next spring, but neither my suppliers nor my banker is interested in loaning large amounts of money right now even though I have written a great expansion plan."

I have scanned your material and feel your banker is a wimp. Change banks. Yes, you need a considerable amount of cash, but everything looks good. You just need someone with enough foresight to get in on a well thought-out business expansion plan. Although you have written well, your business plan does not follow expected standards, so start your search for money by upgrading your business plan.

Why plan? A well-written business plan can do more for a small business than a rich relative.

Begin your money search by purchasing one of the business plan bundles from your local software store, then either visit the Small Business Administration's Small Business Development Center (SBDC) or your favorite CPA for help in rewriting your plan.

There are six distinct and different sources of money for growing businesses other than venture capitalists or initial public offerings, both of which are economically unavailable to most small businesses.

Your major challenge will be to convince these other sources of your ability to pay back the money in some reasonable time. The proof most lenders wish to see is a business plan that addresses six areas:

A historical financial description of your business growth.

Your track record of managing and controlling your growing business.

How you are going to find and attract customers.

Your forecast of sales and the cost of those sales.

When the new capital will show an actual investment return (including an analysis of the total costs of running your firm during that time).

A plan for paying back the invested money.

These topics are covered in most business plan software packages.

Where's the money?

Banks. Just because your bank turns you down doesn't mean all banks will. Banks are in business to make money, and what may be a marginal investment for one may be just what another is looking for. Take your completed business plan to several banks and talk with a commercial loan officer. The size of the bank doesn't mean much; it's the size of their vision that counts.

Small Business Administration. The SBA no longer loans money for most business activities, but does offer programs that guarantee payment of your bank loan. Of prime interest to you would be a "Seasonal Line of Credit" program. If you have been in business for a reasonable period and can demonstrate seasonal activity, you may be eligible for a SBA guaranteed bank loan. Ask your SBA contact for program information, then visit your banker.

Private placement memo. This method of financing offers private investors a debt note that can be converted to equity when the business shows a profit. PPMs are exempt from the time- and money- consuming securities laws, which makes them a cost-effective way of raising special purpose or growth money. You will need the help of a CPA and an attorney who understands these. Shop around.

Angels. This is my favorite way of raising money. In every community there are people willing to take a chance on you and your business for a modest equity position. Attract these individuals through the classified section of your local paper. A typical ad should be headlined "Financial Angel Wanted." Follow with: "Investors wanting equity position in a fast-growing company called."

Finance companies. There is nothing wrong with financing your expansion with money from a finance company. Many offer both short- and long-term debt financing, with a great deal of flexibility of terms and conditions. Use caution as interest rates are usually higher than bank financing.

Credit cards. The cost of money from credit cards is far too high for most entrepreneurs. Yes, there have been a number of businesses that started with a personal loan based on a credit card, but they are the exception. Don't do this one!

Article courtesey of Cincinnati Post

About the author: Paul Tulenko is a small-business consultant based in New Mexico. Additional tips and suggestions are available at www.tulenko.com or call 1-866-TULENKO.

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