When a would-be entrepreneur, especially one who doesn’t fit the traditional profile of a business owner, is looking for startup or early stage capital, there is more than bank borrowing.
That was the message conveyed by financial experts at the “Alternative Funding Options in Northeast Ohio” webinar Tuesday, Nov. 17 that was a part of the ongoing Global Entrepreneurship Week programming.
“Our mission is to lend to folks who are not often getting capital,” said Katy Fuerst, director of programming and community engagement at the HFLA of Northeast Ohio, a Cleveland nonprofit that makes interest-free business and personal loans of up to $10,000. “So many business owners are so defeated before they even try. The bulk of my borrowers are women and people of color, and that is because we are trying to change the ecosystem and who has access to capital.”
Fuerst acknowledged that $10,000 may not be all the capital a client needs, but “it does open the door” to other financing opportunities.
Jeffrey Clawson, chief credit officer at Growth Opportunity Partners, another Cleveland nonprofit, said all five of the people presenting at the webinar work to bring access to capital to underserved borrowers.
“One of the reasons they get left out of the mainstream is that there is a lack, in the world, of places where they can go for what it takes for them to be taken seriously by a mainstream lender,” Clawson said. “Growth Opportunity Partners’ mission is to pull back the curtain on what’s going on at the banks and give you the knowledge you need to create a situation that gets you in that door.”
Another presenter, Dora Rankin, Cleveland city manager of Honeycomb Credit, a Pittsburgh-based firm that helps young businesses get crowd-sourced loans, said her nonprofit looks to help businesses that can have a direct impact on their community.
“We seem to do really well with industries the banks don’t have an appetite for, especially right now, with COVID,” she said. “Banks are very risk adverse right now.”
She said Honeycomb is successfully working with businesses that do walk-in business with consumers, especially restaurants and breweries.
The panelists said one key to their success at helping young businesses find the right financing is that they are not just looking for transactional relationships with clients. They expect to get to know the needs of their clients well — to provide advice, not just money.
B. Fae Harris, a Cleveland-based consultant with the National Development Council, a New York City economic development nonprofit that supports affordable housing and small business lending, said her organization can take up where a lender like HFLA leaves off, lending between $10,000 to several hundred thousand dollars.
“We like to stay in contact with our customers to follow up to meet their needs,” she said. “We partner with organizations (like HFLA) to ensure that a lot of the behind the scenes work to get financials in shape” gets done.
When moderator Michael Elliott, director of neighborhood economic development with Cleveland Neighborhood Progress, a community development funding intermediary, asked the panelists for the most important things they look for when a business owner is applying for money they came up with four key points:
- Know your credit score
- Know your revenue projections
- Be thorough and bring all documentation necessary to the loan meeting
- Know your tax situation and be up-to-date with your tax filings
Global Entrepreneurship Week runs through Nov. 22 and is part of an international event that connects entrepreneurs, investors, researchers and policymakers in 170-plus countries. It’s sponsored by the Global Entrepreneurship Network, a platform of projects and programs in 180 countries that is aimed at making it easier for anyone, anywhere, to start and scale a business.