With Writing Show host, Paula B.

Dear listeners, I have been derelict in the performance of my duties! I have failed to explain the little matter of how we financed our endeavor. Never mind. I am about to rectify my mistake.

If you are starting a business, it is difficult to get a loan from a bank, and here is the reason: you actually need the money. That’s right. If you need money, it’s hard to get it. If you don’t need it, people will throw it at you.

I am overstating the case, of course. Once you are in business, you have revenue, customers, and assets—all things banks like to see. When you are just starting up, you usually don’t have these things, so if you default on your loan, the bank has nothing to repossess. In some cases, you can sign a personal guarantee, and then they can come after your house or your savings account, if you have them. But normally, banks don’t like to give you money when you most need it. Even when they shove brochures at you that say “We do small business loans.” Which they did. As well as saying, “If you ever need anything….” Yeah, right.

A retail store is not the kind of business to attract investment by either angel investors or venture capitalists. Both of those are looking for opportunities to make ten, twenty, or thirty times their investment. Selling books and software isn’t about to do that for them unless, perhaps, you’re Jeff Bezos, CEO of Amazon.com, and we all know how long it took him to get out of the red.

Small business loan from the government, you say? You’re dreaming. Hard to get, slow, and you must meet a series of rather byzantine requirements.

So what were we to do? You can charge merchandise purchases on credit cards, but of course, interest rates are quite high, and you can rack up a lot of debt very quickly. And by the way, it can be almost impossible to close out a credit card account completely and forever. Give a vendor access, and even when you’ve closed the account, you may see mysterious charges showing up. This happens a lot with services that are renewed automatically, like domain names, ISP accounts, and the like. Sometimes even the annual credit card fee shows up this way.

But I digress. The point is that some vendors will give you limited credit, but you still have to pay fairly quickly. Where would this fast cash come from?

Continues....

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