Your Loan Your Way There is more than one way to get a loan.

Lately around Launch I have been in full-blown fundraising mode.  With a signed lease for the expansion of our bakery to a second location, Noe Valley Bakery West Portal, I’ve had to quickly get up to speed and figure out how we were going to fund the expansion.

Over the past several weeks I have learned so much about commercial loans and small business loans. At the beginning of this process, I was nervous and my stomach felt like it was full of rocks. Now, although this is still scary of course, I have been pleasantly surprised at how diverse funding can look for small businesses.

Don’t let anyone ever tell you there is one way to get a loan.

I have been delighted to discover that there are lots of ways to fund business growth, and lots of resources that are ready, willing, and able to help make that dream a reality. Small businesses are the backbone of the economy and the number one generator of jobs in the United States. We hear that a lot from politicians, but realize that that can translate to real support (read: a person walk you through it and available) to make your expansion a reality.

It starts with education.

I started my funding path by learning and understanding all of the available forms of loans out there. I searched, I met with people, I made appointments. And here is the the various options that I found could come into play:

1.Local Commercial bank: Traditional banks are a great option for businesses that are established and looking for the cheapest loan possible. We started talking to a local banker before we even knew our next location or specific expansion plan. By establishing a relationship with a bank they were able to tell us what the bank wanted to see in our financials before we started the process.

2.Non-Commercial Lenders: there are so many nonprofits that loan money to small businesses that tend to fall through the cracks of commercial banks. Some of these loans are still backed by the SBA, are generally a lot less paperwork, and sometimes of these companies will specialize in smaller loans or loans with support or mentorship. These loans will be more expensive, so knowing what is important to you is critical. Some great resources I found here in the Bay Area are Main Street Launch and Working Solutions.

3.City Hall or Local Government: Early in our process we also paid a visit to the Mayor’s office of Economic and Workforce Development. This is a great place to find small business lending partners who can put you in touch with the right fit for the loan you’re looking for. In fact, I was connected with San Francisco’s Small Business Accelerator (yes this is a real position) and she has been the champion of helping us expand.  

4.Local Fundraising Seminars and Food-Based Organizations: The other thing that really helped me understand all of the options available was by going to 2 fundraising seminars here in the Bay Area. The Food Craft Institute is a wonderful non-profit that helps artisan food businesses. From there I was able to find a conference on getting funded, which helped me connect to experts here in the Bay Area who could consult with me on my specific needs, and help me see options.

Know What You Want, and What You DON’T Want

After seeing all of the possibilities, I realized that creating a funding solution is just like entering into an agreement with a new partner. It’s completely customizable, which means that you need to know what you want (and don’t want) before finding the right fit.

I knew I didn’t want:

  • To use my house as collateral
  • To get a second mortgage instead of a business loan
  • To borrow money on my personal credit or financials (I knew the bakery was successful enough to borrow on its own merits, and I wanted to do that)
  • Unreasonable payments. Cash flow is so important in a food business, I didn’t want to be overextended
  • To sell off any shares or pieces of our business

Now, none of these things are wrong or bad. There are times and places where taking on a partner, giving equity or using a house as collateral is fine. But at this point in our careers, these were the things that were right for us.

From there we were able to examine whether or not different options would work:

  • Taking on equity partners to avoid taking on debt (this is a partner who you don’t have to pay monthly you pay a portion of profits). Based on the above, this wasn’t a fit for us.
    • Even with this option there are so many ways you can structure your repayment: based on gross profit, gross revenue, net profit, you can delay repayment dates so you can make a bit of money before you have to start paying it back. There are lots of options
  • Crowd Funding like Kick Starter (We’d done this before, so we didn’t want to do this again)
  • Traditional Bank Loan (Possibility)
  • Non-Profit Loan (Possibility)
  • Getting pre-paid for goods through something like Credibles (Yes, we love this idea)
  • A combination of 2 or more of the above

Ultimately, the Noe Valley Bakery will likely end up with a combination of several of these funding types based on what we really want and need our relationship to look like with our finances and team in the new location.