Several weeks ago, Sara Pope of ConsumerAffairs.com, reached out to me and asked if I could review a step-by-step guide to business loans and financing that her company had produced. My initial reaction was to just say no.
My inclination to decline her offer was based on my experience with hundreds of nascent entrepreneurs. All too often, my first encounter with a new client with a new idea for a product or service and little else is to get a loan from a bank or a grant to fund their business. I spend a considerable amount of time in my practice explaining that there are no grants for entrepreneurs wanting to start a business and also explaining the difference between debt and equity financing when it comes to starting a business.
Because there is not a clear understanding between a startup, looking for risk capital most often in the form of equity to start a new business and an established small business looking at using debt as leverage to scale a business, I was not interested in perpetuating the false narrative that debt financing is how all new businesses get their initial seed money.
My initial impression was the step-by-step guide would be just another such attempt to woo nascent entrepreneurs into debt financing arrangements that they are ill-prepared to undertake given the fragile nature of their enterprise and overall lack of business acumen.
However, I agreed to look over her guide more out of curiosity than anything else. What I discovered was, in fact, a pretty good summation of all the relative facts about debt financing and alternatives to bank financing.
While I often say that “equity is for startup and debt is for scale” and often write for businesses in their early stages, I recognize that some early-stage businesses, as well as some micro businesses, sometimes also called lifestyle businesses, can actually benefit from debt financing.
While I do not have a history of doing endorsements, the step-by-step guide is pretty balanced and worth a shout-out.
