Business Loans

Z

Zachary McClung

New member
I thought I would share some frustration with you and maybe even an idea or two. For the last three years, I have been trying to find a bank who would provide a loan to a Web 2.0 company. What I continue to find is that local, regional, and national banks are really naive when it comes to what we do and how we do it.

If your Bob the I'm going to go broke because my retail store of collectible balloons is going to go out of business, you sure bet the next day Bob is on TV talking about their re grand opening. Now on the other hand, you can make $50k a year, perfect payment history, and a great creditor score and when you say web 2.0 company or web anything they ask you to leave the branch like it is a swear word or something.

I was talking to my bank manager (good friends with) and she was explaining to me about, how any web related things are on a high risk list. Which I guess I can kind of understand but if an idea is great and there is the basic criteria behind it, why would it matter what someone was doing for business. As a person, they still have made minimals. If I was friends with the bank manager and was able to get insider information, I would have been a little peeved to say the list.
 
There isn't much but that isn't the point. There are such things as unsecured loans up to $50k in some instances. There are leasing companies that deal with website and speciality software.
 
Zachary McClung said:
There isn't much but that isn't the point.
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If it is not the point, what is?

Zachary McClung said:
There are such things as unsecured loans up to $50k in some instances.
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Sure, but don't forget we are in a global recession and banks, as loan institutions, are dead. If people have trouble getting a mortage nowadays, against physical commercial properties, then a web 2.0 business is truly at the bottom of their list.

Why not finance it yourself? It is a web-based business. Usually doesn't take too much financing.
There are also angels you can go to. VCs.
 
I was opening this topic up for discussion. I have already financed this and got investors. We have been seeing credit markets for home and commericial opening back up in recent much. We aren't talking about now, we are talking about over the last 3 - 5 years.

It's not an issue of collateral. It is the issue of being prejudge because of the industry you are in and poasts mistakes with the .com bust. Internet properties are woth something. Many professionals especially locally have a hard time putting value on websites or software because they are misinformed or uneducated. If lets say we spend $30k in development on our virtual conference platform. While it may not be tangible it still has a value to it.

I feel that banks are not giving enough opportunity to the web 2.0 companies. Venture Capitolist is not an option for web hosting or most concepts. Most VC firms will not work with startups and they require anywhere between $1 million - 20 million worth of investment.

Anything sub $100k range is really bank loan/family. Angel Investors come in to bridge the gape between the $50k to $1 million range. I have a friend A.C. Ross who presentered a detailed topic on this at the boot camp who works with venture capitolist and angel investors. Most hosting companies cannot produce the 5000% return they want in a 5 year period.
 
Being able to put down collateral is key. Years ago we were in the same situation. We then got some heavy investors with nice portfolios and were able to secure loans with ease.
 
I can see why web based businesses are placed on the high risk list. You could always use personal property as collateral...not that you would want to!
 
I thought the general rule of thumb when starting a business was to make sure that no matter what happens with the business make sure your personal assets are protected? That is usually what I have been told and it seems like good advice to me. I must admit though that going bankrupt is a much bigger deal over here in Aus than it is in the US for example.
 
envisage said:
I thought the general rule of thumb when starting a business was to make sure that no matter what happens with the business make sure your personal assets are protected? That is usually what I have been told and it seems like good advice to me. I must admit though that going bankrupt is a much bigger deal over here in Aus than it is in the US for example.
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They made Incorporations and LLC's for a reason. I made a mistake the first time around, placing the business expenses on my credit card and getting personal loans to pay for it.

The company went belly up and I'm still paying for it. I sti here and wonder every day what It would be like to have an extra $1,5000.00 in cash in my pockets if I would have not gone out on a limb for the business. I would be able to have vacations. That is one of the reasons why I refuse this time around to personally co-sign on anything these days. Being a lone ranger worked out much better and with investors/partners about to come on board it wont be a bad situation. I just wont make that one mistake again.
 
The company went belly up and I'm still paying for it. I sti here and wonder every day what It would be like to have an extra $1,5000.00 in cash in my pockets if I would have not gone out on a limb for the business.
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Is that $15,000.00 or $1,500.00? Regardless, we all learn from our mistakes, and you seem to be on the fast track to success.
 
envisage said:
I thought the general rule of thumb when starting a business was to make sure that no matter what happens with the business make sure your personal assets are protected? That is usually what I have been told and it seems like good advice to me. I must admit though that going bankrupt is a much bigger deal over here in Aus than it is in the US for example.
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You do want to protect your personal assets, which is why I said you wouldn't want to do it. I just meant that it would probably be the only way to provide collateral for a loan on a web based business.

Zachary, I hope you mean $1,500 and not $15,000. Ouch! That's a nice chunk of change. I guess you live and you learn!
 
Web 2.0 companies don't have much to back the loan, unless of course you owned hardware and such at which then maybe you might have a chance. I know its hard so as an alternative venture capitalists (angel capitalists or whatever) provide an alternative route.
 
It also helps to have a business plan in place with a prototype or at least a project layout in place. This is also where personal experience and education comes into play. Sure starting up a web 2.0 company is risky, but it is less risky when you have somebody with a business degree working out the business side of things. Also if you have a computer scientist on board that has worked at a web 2.0 company.

Like Zachary noted, banks like to have asset backed loans, so those are always the easiest, but some people are not comfortable with that and wish to leave it unsecured. This will result in higher interest rates, but some people would prefer that over asset backed loans.
 
Start Small buy a dedi or reseller and start then start earning money and keep making your service better and better currently i go to school and run mine (i have 8 servers for teamspeak servers) I have 1 dedi for web hosting and im doing fine i keep about 10 customers on teamspeak all the time and a few on web hosting my service isnt the best but we are working on it. Your are trying to go instant success no way man you gotta work your way.
 
Kolten said:
Start Small buy a dedi or reseller and start then start earning money and keep making your service better and better currently i go to school and run mine (i have 8 servers for teamspeak servers) I have 1 dedi for web hosting and im doing fine i keep about 10 customers on teamspeak all the time and a few on web hosting my service isnt the best but we are working on it. Your are trying to go instant success no way man you gotta work your way.
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Clearly you do not know my business and length of success. We own and colocate our own equipment and have for about eight years now. We have total design, programming and virtual conference that is worth a pretty penny too. I would never slow success because of a bank saying no or two personally co-sign again.

Steve, I lost in the overall venutre over $30k. There is good miscalculations and bad miscalculations. I would love to have that $30k screw up back. Oh well you win some, you lose some.
 
The first and last time I approached a bank for a online business loan was back in 2006. A year earlier I had learned a very hard lesson why not to be a sole proprietor, yet in spite of loosing close to everything, I managed to come out of it with an untarnished credit rating(760's not bad for 21yrs old).

I walked in to the local office wearing a full suit, with a "year in the making" business plan, and a $6k CD(certificate of deposit) as collateral. My goal was to fill the gap in my $13k funding needs, and establish further business credit.

If my business was anything non web related I have no doubt I would've walked out that door wallet heavy, but the second I said it was an internet based business they lost interest. I'm a born salesman, so generally I can pull things back into my favor, which I actually did for a while, even got some "bright eyes" for a moment, but as I barely touched the surface of technical details I swear I could see the branch manager's brain cell count dropping :(

Here's a educated man who deals with high finance every day, while most Americans can't even balance their check book, yet he's completely brain dead to anything that follows the word "computer".

Obviously frustrated, I still planned to visit a few other banks that month. After a few days of really thinking about it I came to a conclusion. The mass majority of people don't and never will understand "non tangibles", what they can't see. I'm not saying you can't get financing, but it's so much harder for us.

I actually recall Ross, and he had some very good information on VCs, but as said before, they generally bridge your gap above $50k.
 
siforek said:
The first and last time I approached a bank for a online business loan was back in 2006. A year earlier I had learned a very hard lesson why not to be a sole proprietor, yet in spite of loosing close to everything, I managed to come out of it with an untarnished credit rating(760's not bad for 21yrs old).

I walked in to the local office wearing a full suit, with a "year in the making" business plan, and a $6k CD(certificate of deposit) as collateral. My goal was to fill the gap in my $13k funding needs, and establish further business credit.

If my business was anything non web related I have no doubt I would've walked out that door wallet heavy, but the second I said it was an internet based business they lost interest. I'm a born salesman, so generally I can pull things back into my favor, which I actually did for a while, even got some "bright eyes" for a moment, but as I barely touched the surface of technical details I swear I could see the branch manager's brain cell count dropping :(

Here's a educated man who deals with high finance every day, while most Americans can't even balance their check book, yet he's completely brain dead to anything that follows the word "computer".

Obviously frustrated, I still planned to visit a few other banks that month. After a few days of really thinking about it I came to a conclusion. The mass majority of people don't and never will understand "non tangibles", what they can't see. I'm not saying you can't get financing, but it's so much harder for us.

I actually recall Ross, and he had some very good information on VCs, but as said before, they generally bridge your gap above $50k.
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Great Story! Most VC's are a $1 million +. They also aren't into Internet startups. When they say high tech its not web 2.0. A.C. did a great presentation on that. There is little hope from VC's or banks for web hosting or an Internet based venture.

I have had some drop down drag out battles with the banks. I was 730+ with 5+ years of perfect credit history and a good sum of ash deposits. I have people who know me at the bank and who understand the concept. As soon as it gets passed to the loan department it becomes dead. What I ended up doing last time was going to Propser and got an unsecured loan. It worked out ok but recently aftering has been self generating.
 
Zachary McClung said:
Great Story! Most VC's are a $1 million +. They also aren't into Internet startups. When they say high tech its not web 2.0. A.C. did a great presentation on that. There is little hope from VC's or banks for web hosting or an Internet based venture.

I have had some drop down drag out battles with the banks. I was 730+ with 5+ years of perfect credit history and a good sum of ash deposits. I have people who know me at the bank and who understand the concept. As soon as it gets passed to the loan department it becomes dead. What I ended up doing last time was going to Propser and got an unsecured loan. It worked out ok but recently aftering has been self generating.
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Funny thing about the bank rejecting me years ago.. A friend from school now works for them on their website(http://www.americafirst.com/) He called me a few months back asking for help/clarification on a few issues he was having.. Next thing I know I'm doing some minor consulting for the same bank who rejected me, though I didn't bother to bring up the loan again :)
 
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