>> THIS PROGRAM WAS MADE POSSIBLE BY A GRANT FROM THE UNITED STATES DEPARTMENT OF AGRICULTURE, RURAL DEVELOPMENT.

>> I REMEMBER A COUPLE TIMES I PRESENT MY CASE, AND A COUPLE TIMES WHEN IT WAS ALL OVER, I WOULD BE IN TEARS.

>> I LEARNED YOU DON'T TAKE ANYTHING FOR GRANTED.

YOU HAVE TO PLAN FOR EVERYTHING.

YOU HAVE TO ACKNOWLEDGE MURPHY'S LAW, EXPECT SOMETHING TO GO WRONG BECAUSE IF IT CAN, IT WILL.

>> I FIRMLY BELIEVE IN THE PRINCIPAL OF OPM, THAT OTHER PEOPLE'S MONEY, USE OTHER PEOPLE'S MONEY.

AND THAT'S THE FUNDAMENTAL ESSENCE OF CAPITALISM.

>> WELCOME TO VENTURING, I'M KAROL DILLON.

IN MY TEN YEARS OF ADVISING ENTREPRENEURS, THE MOST COMMON QUESTION I'VE BEEN ASKED IS WHERE CAN I GET THE MONEY TO TURN MY IDEA INTO A BUSINESS?

I ASK THEM RIGHT BACK, HOW MUCH DO YOU NEED AND DO YOU UNDERSTAND THE PROCESS?

BECAUSE RAISING MONEY TAKES LONGER AND IS HARDER THAN FLYNN- THAN ANYONE IMAGINES.

YOUR PASSION WILL HELP YOU BUT YOU WILL NOT GET FUNDING ON THE ENTHUSIASM ALONE.

THIS IS SHERRY MALLER, FOUNDER OF JASMINE AND BREAD, A HOME-BASED VENTURA THAT MAKES SPECIALTY CONDIMENTS AND SELLS THEM TO CLIENTS ALL OVER THE COUNTRY, LIKE MANY START-UPS SHE GOT NUDGED INTO BUSINESS BY FAMILY AND FRIENDS WHO LOVED WHAT SHE MADE.

WHEN IT CAME TIME TO FUND THE BUSINESS, SHE FOUND HERSELF RETURNING TO THESE SAME PEOPLE ASKING FOR SOMETHING MORE THAN ENCOURAGEMENT.

HERE'S WHAT HAPPENED.

>> I REMEMBERED MY GRANDMOTHER MADE A TOMATO BUTTER, AND THE SPICES WERE THE SAME AS IN THE APPLE BUTTER, SO THAT YEAR I EXPERIMENTED WITH TOMATO, KETCHUP AND GAVE IT AS CHRISTMAS GIFTS, AND FRIENDS AND FAMILY LOVED IT.

THE NEXT YEAR THEY ASKED FOR MORE, AND THROUGH THE YEAR ASKED FOR MORE, BY THE THIRD YEAR ENOUGH FRIENDS AND FAMILY WERE ASKING FOR IT AND ENCOURAGING ME TO PUT IT ON THE MARKET THAT I THOUGHT I WOULD GIVE IT A TRY.

I WONDERED ABOUT MONEY, AND I TALKED WITH MY LAWYER ABOUT WHAT -- WHICH WAY WAS THE BEST TO GO TO BORROW MONEY OR TO GET INVESTORS.

AND HIS ADVICE FROM THE BEGINNING WAS, IF I COULD START WITHOUT INVESTOR MONEY I WOULD, BETTER OFF.

I WOULD BE BETTER OFF TO BRING INVESTOR MONEY IN LATER ON IN THE GAME, AND THEN I WOULD BE ABLE TO ASK FOR MORE CONTROL.

HE SENT ME TO THE RANDOLPH NATIONAL BANK AND ADVISED ME TO GO FOR AN SBA LOAN.

HE WAS CERTAIN THAT BEING A MINORITY WOMAN IN THE STATE OF VERMONT I WOULD NOT HAVE ANY TROUBLE SECURING AN IS.

BA LOAN.

-- SECURING AN SBA LOAN.

WHEN I STARTED THINKING, I WAS THINKING 10,000, BUT AS I WAS GOING THROUGH THE PROCESS OF A BUSINESS AND MARKETING PLAN, THE NUMBERS CONTINUED TO RISE.

IT IS PRETTY SCARY.

AT THAT POINT, WAS THE COMPLETION OF THE BUSINESS PLAN, WE REALIZED THAT WE NEEDED 25,000 TO START.

THAT'S WHAT WE WERE ASKING FOR.

THE SBA DENIED THE LOAN.

THEY DID NOT THINK THAT WE HAD A MARKETABLE PRODUCT.

I WAS TERRIFIED.

I KNEW THAT THIS PRODUCT -- I KNEW IN MY SOUL THIS PRODUCT WOULD GO, IT WAS TIME FOR A GOURMET KETCHUP.

I WENT TO MY FAMILY, I WENT TO MY HUSBAND'S FAMILY, AND I WENT TO FRIENDS, AND ONE OF THE THINGS THAT I LEARNED IS YOU ASK A LOT FROM FAMILY AND FRIENDS WHEN YOU ARE STARTING A SMALL BUSINESS.

I REMEMBER COUPLE TIMES I PRESENTED MY CASE, AND A COUPLE TIMES I WOULD BE IN TEARS.

TEARS FROM RELIEF.

TEARS FROM THE FRUSTRATION OF ASKING, AND TEARS FROM THE GRATEFULNESS I FELT IN THEM SUPPORTING ME AND SAYING, SURE.

I WILL HELP WITH THIS.

AND FROM 500 TO 2,000 CAME IN FROM EACH PERSON I ASKED, BUT WHEN WE STARTED WE HAD 7,500, AND 1500 WAS FROM THE BANK, SO I WAS ABLE TO RAISE 6,000.

I WROTE AN INFORMAL NOTE, OR IOU, FOR THIS MONEY.

AND NO ONE WANTED THEIR MONEY BACK IN ANY SET PERIOD OF TIME.

BUT THEY DID WANT TO KNOW THEIR MONEY WOULD BE RETURNED EITHER IN THE FORM OF SHARES OR IN THE EVENT THE BUSINESS WAS SOLD OR FOLDED, AND THEN IT WAS TO BE PAID BACK.

NO ONE ASKED FOR INTEREST.

THAT WAS ENOUGH TO BUY MY FIRST LOAD OF VEGETABLES, AND MY FIRST LOAD OF GLASS, AND RENT CHERRY HILL CANNERY, AND START TO PAY FOR MY LABELS.

AND THEN EVERY WEEKEND AFTER THAT WE WERE DOING PRODUCTION ON THE ROAD SELLING THE PRODUCT SO WE COULD DO THE NEXT PRODUCTION.

THE VERMONT STATE AG DEPARTMENT TOOK US TO THE FIRST FOOD SHOW.

I HAD BEEN IN BUSINESS MAYBE THREE MONTHS.

AND I WAS LABELING MY PRODUCT IN THE PARKING LOT TO GET IT IN.

I ENDED UP WITH A PICTURE ON THE FRONT PAGE OF THE NEW YORK TIMES IN COVERING THE SHOW.

ALONG WITH TWO OTHER VERMONT COMPANIES.

I HAD JUST A COUPLE OF PARAGRAPHS ABOUT MY KETCHUP.

BUT THAT IS WHAT MADE A CREDITABLE COMPANY.

LOOKING BACK ON IT TODAY, I AM GLAD THAT I DIDN'T GET THE $25,000.

IT'S BEEN A HARDER STRUGGLE TO GROW THIS BUSINESS, BUT I KNOW THIS BUSINESS INSIDE AND OUT.

IF YOU HAD THE MONEY AT YOUR FINGERTIPS YOU PROBABLY WOULD OPT TO SPEND THE MONEY THAN TO SPEND AN EXTRA TWO OR THREE HOURS.

WE SPEND THE TIME.

AND HOPE THAT THIS BUSINESS WILL PAY US BACK FOR THE TIME THAT WE SPENT IN PUTTING OUT A QUALITY PRODUCT.

>> SHERRY'S STORY IS NOT UNIQUE.

MOST ENTREPRENEURS START-UP MONEY COME FROM THEIR SAVINGS AND FAMILY AND FRIENDS.

WHAT IS UNIQUE IS THAT HER HOPE FOR PAYBACK MAY NEVER MATERIALIZE.

SHE'S FIGHTING AN ILLNESS THAT NOT ONLY CAST A SHADOW OVER THE FUTURE OF HER BUSINESS, BUT THREATENS HER HEALTH, AS WELL.

WE WILL LOOK INTO THIS IN GREATER DEPTH IN A LATER EPISODE OF VENTURING.

FOR SHERRY, FINANCING CAME IN TWO SOURCES, INDIVIDUALS IN A BANK.

THE THREE FOUNDERS OF NORTHEAST PRECISION, DOUGLAS JOHN, BRUCE, AND ALLEN TOOK QUITE A DIFFERENT ROUTE TO FINANCE THEIR MACHINE AND SHEET METAL COMPANY.

THEY NEEDED 300,000 AND A LOT OF STAYING POWER.

>> BY THE TIME WE FINISHED THE BUSINESS PLAN WE REALIZED WE WOULD NEED FINANCING FIRST OF ALL FROM A LOCAL BANK, AND WE FOUND OUT THAT NO LOCAL BANK WOULD GIVE US ANY MONEY WITHOUT SBA GUARANTEES SO THAT MEANT AN SBA GUARANTEED LOAN THROUGH A BANK, AND WE ALSO WOULD NEED STATE MONEY FROM THE STATE DEVELOPMENT AGENCY, AND PLUS WE ALSO HAD AN INTEREST IN RECEIVING SOME MONEY FROM A REGIONAL DEVELOPMENT AGENCY, AND WE WERE ALREADY PRETTY MUCH PROMISED MONEY FROM THE LOCAL DEVELOPMENT AGENCY.

SO WE HAD QUITE A FEW DIFFERENT AGENCIES INVOLVED, AND THE FINANCIAL PACKAGE WAS GOING TO BE FAIRLY COMPLICATED.

WE WENT THROUGH, I THINK, PROBABLY FOUR REVISION LEVELS OF THE BUSINESS PLAN.

THE FIRST COUPLE REVISIONS WERE SHOT DOWN PRETTY HEAVY.

THE DEVELOPMENT PEOPLE THAT LOOKED AT THEM AND SAID THAT THEY WERE LACKING HERE OR THERE.

SO WE WENT BACK AND REWROTE AND DID MORE RESEARCH AND TRYING TO GET SOMETHING THAT WOULD NOT LEAVE ANY DOUBTS IN ANYONE'S MIND.

SOMETIMES YOU FELT LIKE HOW MUCH MORE DID THEY NEED IN THE BUSINESS PLAN?

IT SEEMED LIKE IT KEPT GETTING BIGGER AND BIGGER.

BRUCE KEPT PUTTING MORE INFORMATION AND HE WOULD BRING IT IN OR SOMEBODY WOULD LOOK AT IT, AND YOU NEED THIS AND THAT MORE.

IT IS KIND OF FRUSTRATING, AND I THOUGHT TIME CONSUMING.

>> WE KNEW FROM THE START THAT WE WOULD HAVE TO HAVE EXTRA MONEY.

WE HAD THE MONEY WE COULD PUT INTO IT, AND WE HAD EQUIPMENT THAT WE HAD PURCHASED FROM DIFFERENT PLACES.

WE HAD SOME CAPITAL OF OUR OWN, BUT THERE WAS NOT ENOUGH THAT WE KNEW THAT WE HAD TO HAVE MORE MONEY FROM BANKS AND LOAN AGENCIES, AND WE HAD TO GET OUT THERE AND PUSH TO GET IT.

>> I THINK THAT WE MIGHT HAVE A PROBLEM WITH THE BREAKAWAY, DO YOU THINK YOU CAN TAKE THAT OFF?

>> WE PRESENTED IT TO A BANK, ACTUALLY TO, QUITE A FEW BANKS.

THE BANK LOOKED AT THE PACKAGE AND GAVE IT PRETTY MUCH A SEAL OF APPROVAL BASED ON SBA LOAN GUARANTEE FOR THE WORKING CAPITAL PORTION.

THIS IS ONE THAT WE DID NOT EXPECT ANY PROBLEM WITH.

EVERYBODY GETS SBA LOANS.

AND WE HAD RECEIVED A COMMITMENT FROM A LOCAL DEVELOPMENT AGENCY, THE ONLY REMAINING OBSTACLE WAS THE STATE LEVEL FUNDING.

AND WE HAD TO HAVE THE BANK FUNDING BEFORE THE STATE WOULD ACT ON IT.

AND WE THOUGHT WE WERE HOME FREE WITH THE BANK LOAN, ONLY TO FIND OUT THAT IN OCTOBER OF LAST YEAR, THE SBA WOULD NOT -- THEY HAD DECLINED TO GUARANTEE THE WORKING CAPITAL PORTION OF THE LOAN.

THAT SET US BACK ABOUT A MONTH OR SO.

THE SBA WAS ASKING THAT WE HAVE MORE, BETTER DEBT EQUITY RATIO THAN WE HAD, AND WE WERE AT THE LIMIT ALREADY ON THE CAPITAL THAT WE COULD CONTRIBUTE.

THE ONLY SOLUTION WAS RAISING MORE CAPITAL THROUGH THE SALE OF PREFERRED STOCK.

THE THREE OF US BASICALLY WENT OUT AND STARTED SELLING PREFERRED STOCK, WHICH WAS NOT AN EASY TASK.

AND WE WENT TO SEE FRIENDS, FAMILY, AND LOCAL BUSINESS LEADERS, AND WE DID FINALLY END UP WITH SIX PREFERRED STOCKHOLDERS AROUND THE END OF NOVEMBER.

JUST IN TIME TO MEET THE DEADLINE, AND FOR THE DECEMBER STATE MEETING.

AS SOON AS WE HAD THE INVESTORS LINED UP SBA FELL INTO PLACE, AND WE WENT TO THE STATE MEETING, AND IN BURLINGTON, ALL THREE OF US WITH OUR WIVES TO THE MEETING, AND SAT DOWN AND ANSWERED THE QUESTIONS FOR THEM.

AND THEY APPROVED OUR LOAN THAT SAME DAY.

THE IMPORTANT THING ABOUT THIS DEBT TO EQUITY RATIO THAT THE SBA RECOGNIZED, AND WE DID NOT RIGHT WAS THE FACT THAT IN ORDER TO SUPPORT YOUR DEBT STRUCTURE, IN THE FIRST FEW MONTHS OF A BUSINESS YOU CANNOT RELY ON INCOME GENERATED THROUGH SALES.

CHANCES ARE YOU WILL NOT HAVE A LOT OF SALES.

I THINK THAT WE PROBABLY IMPRESSED SOME OF OUR LENDERS BY OUR DETERMINATION IF NOTHING ELSE, AND I THINK THAT'S ONE OF THE LESSONS OUT OF THE PROJECT IS THAT BY THE TIME THAT THEY SAW US BACK THE 15 OR 20th TIME, THEY KNEW THAT WE WERE SERIOUS, AND WE KEPT COMING BACK.

THEY CHEWED US DOWN AND WE KEPT COMING BACK, AND WE WOULD ALMOST ALWAYS COME BACK WITH SOMETHING BETTER THAN BEFORE.

SO THEY KNEW THAT WE WERE WORKING ON IT.

WE DID WORK ON IT HARD.

AND IT PAID OFF IN THE END.

I LEARNED YOU DON'T TAKE ANYTHING FOR GRANTED.

YOU HAVE TO PLAN FOR EVERYTHING.

YOU HAVE TO ACKNOWLEDGE MURPHY'S LAW AND EXPECT SOMETHING TO GO WRONG, BECAUSE IF IT, CAN IT WILL.

IF WE HAD TO DO THIS OVER AGAIN I AM SURE THAT WE COULD CUT IT IN HALF, MAYBE CUT THE TIME DOWN TO A THIRD OF WHAT IT TOOK US.

>> HE'S NOT THE FIRST ENTREPRENEUR I HAVE HEARD INVOKE MURPHY'S LAW.

ESPECIALLY WHEN IT COMES TO FINANCE.

BUT THEIR DECISION TO SEEK FUNDING FROM FIVE DIFFERENT SOURCES MAKES A LOT OF SENSE IN TODAY'S BUSINESS ENVIRONMENT.

IT'S NOT ONLY SMART, IT'S ALMOST ALWAYS NECESSARY.

JIM WILLIAMS IS FOUNDER AND PRESIDENT OF EM-TECH, MAKERS OF BAR CODE LABEL EQUIPMENT.

HE STARTED WITH 40,000 OF HIS OWN MONEY, AND AN IMPORTANT QUESTION THAT ALL ENTREPRENEURS SHOULD ASK THEMSELVES.

>> I HAD TO DECIDE, AND I DECIDED EARLY, ALTHOUGH IT TOOK A COUPLE OF WEEKS OF TOTAL SOUL SEARCHING TO COME TO THIS DECISION, DID I WANT TO OWN 1% OF AN IBM POTENTIAL OR OWN 100% OF MYSELF, JIM WILLIAMS INC.

AND I MADE THE DECISION TO GO FOR THE 1% OF IBM POTENTIAL COMPANY, BECAUSE ONLY THAT WAY COULD I ACHIEVE SOME OF MY PERSONAL GOALS, PERSONAL% FINANCIAL GOALS.

I FIRMLY BELIEVE IN THE PRINCIPLE OF OPB, USE OTHER PEOPLE'S MONEY, AND THAT'S THE FUNDAMENTAL ESSENCE OF CAPITALISM.

HERE YOU HAVE THE CLASSIC STORY OF A POOR BOY WITH A BIT OF MONEY WITH A LOT OF ENERGY AND A LOT OF IDEAS, AND USING OTHER PEOPLE'S MONEY, THEIR EQUITY AND CASH, SO BETWEEN THEIR CASH AND MY DREAM AND MY WILLINGNESS TO SWEAT, HENCE THE PHRASE, SWEAT EQUITY, I WILL PUT TOGETHER, I HOPE TO PUT TOGETHER A COMPANY THAT WILL GENERATE FINANCIAL REWARDS FOR BOTH OF US.

YOUR CASH EQUITY, MY SWEAT EQUITY, AND WE ARE OFF F TO THE RACES.

THE START OF A COMPANY IS INVIGORATING.

AND IF YOU DON'T FIND IT, YOU ARE NOT A CLASSIC ENTREPRENEUR.

I GET GOOSE BUMPS.

IT'S A REAL TURN-ON.

SO ONCE I MADE THAT DECISION TO GO FOR THE 1% OF AN IBM PHILOSOPHY THAT, ALLOWED ME TO SELL PIECES OF THE COMPANY TO POTENTIAL STOCKHOLDERS WITHOUT HAVING TO COME TO THAT ISSUE EVERY TIME I APPROACHED THE POTENTIAL STOCKHOLDER, OH, DOES THIS MEAN I WILL RELINQUISH CONTROL OF THE COMPANY?

EMOTIONALLY I HAD DONE THAT.

HAVING DECIDED THAT MY PERSONAL GOAL IS TO OWN 1% OF IBM, AUTOMATICALLY DICTATED THAT I UNDERSTOOD THAT I COULD LOSE MY JOB AT ANY TIME BECAUSE I NO LONGER CONTROL THE VOTES NECESSARY TO KEEP ME IN AS A DIRECTOR.

I ARRANGED A THREE-PAGE CONTRACT BETWEEN THE COMPANY AND FIVE INDIVIDUALS VERY WELL HEALED, VERY SOPHISTICATED INDIVIDUALS BASICALLY THEY GIVE ME CASH AND I GIVE THEM STOCK, NO GUARANTEES EXCEPT THE OPPORTUNITY TO MAKE MONEY WAS THERE AS PRESENTED IN THE EARLY BUSINESS PLAN.

THE LESSON LEARNED ABOUT THE DIFFERENCE BETWEEN PRIVATE INVESTMENT AND A BANK WAS PAINFULLY LEARNED.% I KNOCKED ON BANK'S DOORS WITH MY BUSINESS PLAN, AND I MEAN, I AM A GRADUATE, I KNOW WHAT I AM DOING SO OF COURSE YOU SHOULD LOAN ME HALF A MILLION DOLLARS.

COLLATERAL?

WHAT'S THAT?

I HAVE NO COLLATERAL BUT LOOK AT THIS PLAN, HOW CAN HE FAIL?

THE BANKER HAS TO ASSUME YOU ARE GOING TO FAIL BECAUSE THEY WANT TO KNOW HOW THEY CAN RECOVER THEIR ASSETS WHEN YOU GO CHAPTER 11 OR 7.

AND A STOCKHOLDER OR A V. VENTURA CAPITALIST HAS TO ASSUME YOU ARE GOING TO SUCCEED OR WHY ELSE WOULD YOU PUT MONEY INTO YOU SO THEIR QUESTION IS HOW REQUEST I GET MY MONEY OUT AS YOU SUCCEED, AND THE BANKER'S FIRST QUESTION IS, HOW CAN I GET MONEY OUT AS YOU FAIL, AND FRANKLY THE THOUGHT OF FAILURE NEVER OCCURRED TO ME.

ALL INVESTORS, WHETHER THEY ARE A BANK, INDIVIDUALS, ARE TAKING A HARD LOOK AT YOU AS THE KEY PERSON IN ORGANIZING THIS COMPANY AND LOOKING AT YOUR PERSONAL CREDIBILITY.

DO I BELIEVE YOU.

NEVER MIND THE NUMBERS, DO I BELIEVE YOU?

AND THAT'S WHERE I BELIEVE IT'S ESSENTIAL YOU BELIEVE IN YOUR OWN HEART OF HEARTS YOUR PLANS, YOUR GOALS.

YOU BELIEVE YOU REALLY CAN DO IT.

>> HE'S RIGHT.

THAT'S WHY IT'S IMPORTANT TO HAVE A GOOD PLAN THAT INCLUDES YOUR BUSINESS AS WELL AS YOUR OWN PERSONAL GOALS.

ONCE YOU IDENTIFIED THEM IN A WELL THOUGHT OUT PLAN, THE PROCESS OF CHOOSING FINANCING SOURCES WILL BE EASIER.

DID I SAY EASIER?

SMITH AND POST MAY NOT THINK SO.

THIS WEEK AS WE CHECK BACK IN ON THEIR ADVENTURE, THEY ARE COMPLETED THEIR PLAN AND ARE ATTEMPTING TO RAISE MONEY, LET'S JOIN THEM AS THEY SEEK A BANKING PARTNER.

>> ARE YOU FOLKS GOING TO BE TH- >> WE WILL BE 50-50 PARTNERS.

>> AND YOU FOLKS ARE THE SOURCE OF CAPITAL?

>> I FIND MYSELF GOING INTO MEETINGS WITH THE BANKS WITH A FAIR YES OF CONFIDENCE BECAUSE I FEEL THAT WE HAVE DONE A TREMENDOUS AMOUNT OF RESEARCH, AND WE HAVE A VERY WELL PUT TOGETHER PLAN.

>> AS YOU LOOK AT THE INCOME STATEMENTS, I PERSONALLY FEEL THAT ALTHOUGH THESE ARE FAIRLY CONSERVATIVE NUMBERS, THEY ARE QUITE AGGRESSIVE.

>> I WOULD BE MORE COMFORTABLE IF I SAW A REPRESENTATION OF WHAT'S MORE LIKELY AS FAR AS THE CASH FLOW AND INVENTORY AND SUPPLY PURCHASES AND MAYBE AN ASSUMPTION IF YOU ARE NOT GOING TO GET YOUR APPLES WEEKLY YOU WILL HAVE TO BUY A BIG BLOCK IN JUNE OF 1990 WHATEVER, WHAT'S THAT GOING TO DO TO THE CASH FLOW?

>> WE MET WITH MARK FROM THE BANK FOR WH WELL OVER AN HOUR, D A LOT OF THAT TIME WAS SPENT ASSURING HIM THAT WE HAD THE COLLATERAL TO BACK UP A LOAN AND WE WERE FINANCIALLY RESPONSIBLE.

>> IF YOU LOOK AT THE SALES, 7,591 IN MONTH ONE IS RELATIVELY SMALL SALES, AND IN FACT, WE HAVE DISTRIBUTOR SALES AT ZERO.

IF WE DON'T MEET THESE PROJECTIONS, WE ARE NOT GOING TO BE STRAPPED.

WE HAVE A 60,000 CAUTION IN OUR LINE OF CREDIT, AND WE HAVE GOT, UM, TRADE CREDIT, WHICH WE EXPECT WILL PROVIDE US ADDITIONAL CASH FLOW CUSHION.

>> TELL ME A BIT ABOUT PERCEIVED VERSUS ACTUAL, NUTRITIONAL BENEFITS OF THE PRODUCT.

>> I WAS SURPRISED AT HIS THOROUGHNESS ONLY BECAUSE OF HIS RESPONSE FROM THE BANKER THE DAY BEFORE WHO GAVE A CURSORY REVIW OF THE PLAN.

>> HOW DID YOU MAKE THOSE IF YOU ARE NOT UP.

>> WE HAVE A MODEL.

AN OPERATION THAT WE CAN MAKE CHIPS, THREE APPLES AT A TIME.

IT TAKES A WHILE TO PUT OUT ANY PRODUCTION BUT WE CAN DO ENOUGH TO DO THE FOCUS GROUPS AND FOR SAMPLES.

IT'S MORE TINKERING IN IT BECAUSE WE DON'T HAVE CONTINUOUS FILTERING AND CAREFUL TEMPERATURE CONTROL SO THERE IS A LOT OF JUGGLING AND CONSTANT CHECKING AND FILTERING AND THAT SORT OF THING.

>> I WAS -- I DON'T WANT TO SAY FRUSTRATED BUT DISAPPOINTED THAT HE WAS NOT ABLE TO INTERACT MORE ABOUT WHAT HE REALLY FELT ABOUT THE PLAN.

THERE WAS NOT ANY REAL INDICATION.

>> WHAT'S YOUR PRIMARY DEBT FOR THE PROJECT?

>> TOO MANY QUESTIONS TO GIVE YOU A RESPONSE AT THIS POINT.

I RESERVE THAT FOR THE NEXT DISCUSSION.

>> THE OUTCOME OF THE MEETING WON'T BE KNOWN FOR SEVERAL WEEKS.

BUT CLEARLY SMITH AND POST, AS WELL AS THE BANKER, DID THEIR HOMEWORK ON THE BUSINESS PLAN.

AS AN ENTREPRENEUR YOU WILL HAVE TO DEAL WITH POTENTIAL FUNDERS MANY TIMES THROUGHOUT THE LIFE OF YOUR BUSINESS.

IT'S A GOOD IDEA TO KNOW WHERE THEY ARE COMING FROM.

WE ARE GOING TO VISIT THE OTHER SIDE OF THE TABLE AND FIND OUT WHAT POTENTIAL LENDERS OR INVESTORS ARE LOOKING FOR WHEN APPROACHED FOR START-UP FUNDS.

>> BEFORE THE ENTREPRENEUR COMES INTO THE BANK THEY HAVE DONE THEIR HOMEWORK, THEY NEEDED TO DECIDE WHAT IT IS THAT THEY WANT TO DO AND HOW THEY THINK THAT THEY CAN GET IT DONE.

THEY NEED TO BRING INTO THE BANKER A GOOD MARKETING PLAN, A GOOD BUSINESS PLAN.

AND A GOOD PRO-FORMA SO THE BANKER CAN SEE HONESTLY WHAT THEY EXPECT TO HAPPEN IN THE NEXT YEAR OR TWO YEARS OR THREE YEARS.

A PRO-FORMA IS A PROJECTED INCOME STATEMENT FOR THE BUSINESS THAT THEY ARE PLANNING.

IT WOULD SHOW THEIR INCOME AND THEIR EXPENSES, AND GENERALLY FOR AT LEAST A ONE-YEAR PERIOD, SOMETIMES WE LOOK FOR A FIVE YEAR PERIOD.

WHEN PEOPLE COME INTO THE BANK WE TRY NOT TO GET TURNED OFF BY THE CUSTOMER BECAUSE OUR BUSINESS IS TO HELP THEM OUT AND DO LOANS FOR THEM.

HOWEVER, IF YOU GET THE FEELING THEY ARE NOT WILLING TO HAVE A DIALOGUE WITH YOU AND ONLY THEY WILL HAVE A MONOLOGUE AND MAKE DEMANDS UPON YOU AND DON'T UNDERSTAND YOUR POSITION OR THE, OR ACCEPT THE VALUE OF THE EXPERIENCE, IT'S HARD TO HAVE A GOOD RELATIONSHIP WITH A CUSTOMER.

>> THE FIRST THING THAT WE WOULD LIKE TO SEE WHEN SOMEONE COMES IN IS A BUSINESS PLAN.

YOU LOOK AT THE PLAN AND YOU SAY, HOW DID YOU ARRIVE AT THIS PROJECTED SALES FIGURE.

WHAT MAKES UP THE SALES FIGURE, AND HOW DID YOU ARRIVE AT THE COST OF SALES.

HOW DID YOU ARRIVE AT THESE ESTIMATED EXPENSES, AND THE INDIVIDUAL THAT CAN GIVE THE ANSWERS, YOU KNOW THEY PUT A LOT OF THOUGHT AND WORK INTO IT, AND THEY HAVE DONE THE HOMEWORK.

THE MAXIMUM FINANCING YOU ARE GOING TO GET AS A PERCENTAGE OF GOING INTO BUSINESS IS WHAT YOU INVEST IS 2-1.

FOR EVERY DOLLAR YOU INVEST, YOU CAN BASICALLY BORROW TWO.

THE INDIVIDUAL HAS TO IMPRESS YOU, AND WITHOUT THE INDIVIDUAL, I CAN'T EMPHASIZE ENOUGH YOU CAN HAVE THE BEST PLAN IN THE WORLD BUT WITHOUT THE INDIVIDUAL DEVOTED, THERE IS NO WAY THIS WILL MAKE IT.

WE TRIED TO GET THE INDIVIDUALS TO BUILD INTO A START-UP, ENOUGH CASH IN THE CHECKING ACCOUNT TO COVER ALL EXPENSES OF OPERATION, NO LESS THAN THREE MONTHS, AND AS FAR AS SIX MONTHS.

THIS WILL ALMOST ASSURE IF THEY DO THIS, THAT BUSINESS CAN OPERATE FOR APPROXIMATELY TWO YEARS TROUBLE-FREE AS FAR AS THE CASH IS CONCERNED.

WE DON'T PROPOSE WE ARE EXPERTS IN EVERY FIELD, BANKERS ARE NOT AN EXPERT IN EVERY FIELD SO YOU DEVELOP A SICK SENSE, IS MANAGEMENT CAPABLE AND CAN THEY REALLY PULL THIS OFF?

THE PLAN WILL, BASICALLY, GIVE YOU THAT.

A BUSINESS PLAN FOR A PERSON THAT COMES INTO MEET ME THE FIRST TIME IS NOT AS IMPORTANT AS IT IS TO A BANK OR TO A FINANCE COMPANY.

IS THE MOST IMPORTANT THING TO ME FOR THAT PERSON IS THE FIRE IN THE GUT AND THE ENTHUSIASM.

THE BUSINESS PLAN WILL COME ALONG.

THE PEOPLE THAT I DEAL WITH IN MANY INSTANCES ARE NOT THAT SOPHISTICATED.

THEY HAVE GOT THE IDEA, BUT THEY DON'T KNOW HOW TO TAKE THE NEXT STEP MAYBE.

THE BUSINESS PLAN IS IMPORTANT, YES, BUT WE CAN WALK THROUGH THAT, AND WE CAN GET TO THAT POINT.

I AM MORE INTERESTED IN THE PERSON, I AM MORE INTERESTED IN THE IDEA AND IF HE HAS A NICHE.

THAT'S WHAT IMPRESSES ME.

IN TIMES LIKE THIS, THE WORLD OF PRIVATE INVESTOR, I THINK, IS VERY IMPORTANT.

AND THE REASON IT'S IMPORTANT IS BECAUSE BANKS ARE HAVING SUCH A STRUGGLE NOW.

THEY ARE NOT ABLE TO TAKE THE RISK FOR A SMALL PERSON TO GET STARTED.

THEY NEED THAT FIRST STEP, AND I THINK THAT THAT'S THE ROLE.

OUR ROLE IS TO SHOW THE BANK THAT THERE IS SOMEONE BEHIND THEM, THERE IS SOME MONEY COMMITTED AND SOME EQUITY IN THIS PROJECT, AND THAT IS JUST NOT AN IDEA.

A PERSON THAT HAS AN IDEA AND HE'S COMMITTED TO THAT IDEA.

I AM LOOKING FOR A PERSON THAT HAS SOME ENTHUSIASM ABOUT THAT IDEA AND EXCITEMENT AND IS GOING TO TELL ME THEY ARE COMMITTED TO THIS.

AND THAT THEY ARE NOT JUST IN HERE ON A WHIM.

>> THERE IS NO SIMPLE SOLUTION TO FINANCING THE BUSINESS.

THIS IS A TOUGH PROCESS.

BUT IT CAN BE MADE EASIER BY DEVELOPING A GOOD PLAN.

WHETHER IT BE BANKS, DEVELOPMENT AGENCIES, VENTURE CAPITAL GROUPS OR INDIVIDUALS MOST FUNDING SOURCES WANT TO SEE YOU HAVE THE ABILITY AND THE DETERMINATION TO TRANSFORM THE IDEA INTO A BUSINESS OPPORTUNITY.

NEXT TIME WE'RE GOING TO LOOK AT ENTREPRENEURIAL BUSINESSES IN THE EARLY STAGES, AND WE WILL HEAR ABOUT THE CLASSIC MISTAKES THAT THE FOUNDERS MADE THAT NEARLY PUT THEM UNDER BEFORE THEY GOT UP AND RUNNING.

REMEMBER MURPHY'S LAW?

THAT'S VENTURING.

I'M KAROL DILLON.

SEE YOU NEXT WEEK.

>> THIS PROGRAM WAS MADE Captioning Performed By LNS Captioning www.LNScaptioning.com >> THIS PROGRAM WAS MADE >> THIS PROGRAM WAS MADE POSSIBLE BY A GRANT FROM THE UNITED STATES DEPARTMENT OF AGRICULTURE RURAL DEVELOPMENT.

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