No matter how savvy you are, negotiating the waters of the financing
world can be daunting- more so if you are involved with recycling.
Here are four key points to reduce your pain. Do these things
and you may have the financier cheering.
1. Know Before You Go
Take stock of what stage your company is at and approach
funding sources that are a good match for your stage of development.
If you have a startup, you might first think about family and
friends, angel investors, a supportive institutional financier
(like Self-Help*), or even credit cards. If the company is operating
and has some collateral, more traditional sources begin to open
up - and they will have cheaper money. If your early-stage company
anticipates a large and profitable growth spurt and can afford
to provide returns to an investor of 30 to 40 percent, then
venture capital is an option. Find an experienced attorney and
check out the recycling investment forums. If you really must
purchase a building (rather than lease)- or have large equipment
needs, the Small Business Assistance (SBA) 504 programs may
be for you.
2. Be prepared
Before you call, get your ducks in a row. Every business should
be able to fax its financial statements that day. Know your
personal credit history. If there are any blemishes, have explanations
and documentation prepared ahead of time. Start building a nest
egg to cover ownerÕs equity. At the least, you will need cash
to pay for closing costs. Know your personal and business assets.
Equipment has about a 50 percent collateral value, real estate
70 to 80 percent.
3. Prove You are a Player
Is your resume up-to-date? Do you have a current list of references.
Are you active in a recycling association? Honestly assess gaps
in management skill, and, if need be, bring in additional help.
Management capability is the single most important predictor
of business success. Document yours.
4. Increase the Info, Reduce
the Hype
A good business plan should focus briefly on the basics - and
provide details, not generalities like "we need only one
percent of a billion dollar industry segment." Recyclers
should be especially well-informed about raw material supply,
market growth, government regulations and operations issues.
Do not talk endlessly about how great the product is - there
is much else to discuss and financiers have limited attention
spans. Use your 15 minutes of fame to your best advantage.
Fred Broadwell is an Environmental
Loan Fund specialist with Self-Help Ventures Fund (919) 956-4400.
Self-Help is a North Carolina community development bank that
has loaned $3.5 million to recycling companies during the past
several years.
Reprinted in part from Recycling
Works a publication of the NC Recycling Business Assistance
Center.
