? about start up financing for a new small business.

Factual Questions
1

Quick synopsis of the situation:
Myself and two friends have started a company related to the industry in which we have 12+ years experience. We will be manufacturing items and wholesaling them to companies that we have relationships with. The other two have poor credit due to divorces, and I have marginal credit due to being overburdened with student loans.

We will be receiving a letter of intent from a very large and old corporation on Friday. It is a contract for $400,000 worth of business over the next 3 years. Our company has been in existance for 3 months as a partnership, and will be incorporated within the next 30 days. This contract will go into effect on January 15.

Our raw material and production costs on the items are roughly 1/2 what we have sold them for in this agreement, so the company will gross profit a little over $200,000.

Problem: we will need $4-5000 to get the raw materials needed to start a projet this size. All orders so far have been in the $1500 range, which we can handle.

What are our best options for getting a small short term loan? Would a bank be willing to touch us without a personal guarantee from someone? How about an SBA loan?

2

I started my own business last year (one year old! Yay!) but I did not need the kind of start-up capital you do.

What I wanted to contribute is: the SBA has a web site you might like to check out: www.sba.gov

So far I have only put a couple thou on my credit card: the mortgage is paid; my kids are fed: yahoo ! You will love being the boss. Good luck !

3

The SBA doesn’t make loans; it guarantees portions of loans made by others. If you can get their guarantee, it makes it much easier to get a bank loan. But there is a HUGE–no, make that an INORDINATE–amount of paper involved.

To get a bank loan, you need either (a) a history of success as an entrepreneur; or (b) fungible, easily traded assets to pledge as collateral. Talk to bankers–you’ll learn a lot even if you get turned down.

If all you need is a few thousand dollars, though, I really think you’re best off hitting up every well-heeled friend, relative, or friend of friend you can think of until you find a sucker–I mean INVESTOR :smiley: !