270 ENTREPRENEURSHIP
One of the fastest growing and most popular of these is the “micro lenders” program
that frequently targets women entrepreneurs and minority-owned firms.Micro Loan Programs. Businesses owned by women and minorities have had difficul-
ty getting debt financing, partly because of discrimination but also because they start the
wrong types of business. Small start-ups in service industries have no collateral, have
high failure rates, and present no entry barriers to protect against competition, yet the
growth rates of start-ups by women and minorities are high.
To address the gap between the need for debt financing and the availability of cred-
it, the government and the private sector offer micro loans. The U.S. Small Business
Administration manages a micro loan program to help women and minorities get loans
of up to $35,000 at market interest rates. Professor Mohammed Yunus founded the
Grameen Bank as a way to help women in India pull themselves up from extreme pover-
ty and increase their independence. This micro loan program has made over 5 million
micro loans, and Yunus received the Nobel Peace Prize in 2006.^20Positioning for a Loan. The time to establish a relationship with a banker or lender is
before a loan is needed. Because of their inherent conservatism, banks do not lend money
in emergencies (unless they already have some money at risk) or on short notice.
Entrepreneurs should call the presidents of the banks they might use and introduce
themselves. They can set up a meeting to tell the president about the business, but
should not ask for a loan at this meeting. Instead, they should ask who in the loan
department might be a good match for the firm’s business-financing needs. When they
call the person the president recommended, they can tell him or her that the president
referred them.
Bankers look for answer to four key questions when evaluating a business proposal.
The answers to these questions should be clearly and concisely communicated both in
writing and in discussions between the entrepreneur and the lender.- What will the money be used for? Are there other sources of financing to help
spread the risk? - How much money is needed? Asking for too much means paying for unnecessary
financing. Asking for too little may mean being unable to keep the business on
track. - How and when will the money be paid back? Time is money, and the sooner the
repayment, the higher the return and lower the risk for the bank.
have to guide the company at the same
time that they attend to the mechanics of
going public.“It’s not easy,” reports David Brown, CEO of
Website Pros Inc., a company that went pub-
lic in 2005. “We’re in a tough business cycle
for IPOs right now.”SOURCE: Adapted from Rebecca Buckman, “Tougher
Venture: IPO Obstacles Hinder Start-Ups,” The Wall Street
Journal, January 25, 2006: C1; Bruce R. Evans, “When
It’s Time to Think About an IPO,” Inc., November 1, 2005.
Retrieved from the Web July 7, 2006.
http://www.inc.com/resources/inc500/2005/arti-
cles/20051101/evans.html; R. Saloman, “Second Thoughts
on Going Public,” Harvard Business Review 55 ,
September-October 1977: 126-131; S. Jones and B.
Cohen, The Emerging Business(New York: Wiley, 1983).