With so many options available, who to borrow from can be a tough choice. Gina Harman (CEO of Accion, The U.S. Network) discusses her point of view on this difficult decision.
When a business owner is looking to finance, and I think there are lots of forms of finance available, how do you choose the right one is, it's a thoughtful process. A lot of the businesses that Accion serves are way too small for someone to even be thinking about an investor. But there are those who should and, in fact, we have great examples of businesses who have started with a loan from Accion, have gone through a period of mentorship and coaching, and have ended up taking an investment and doing really well opening a second shop or moving from a flea market to a retail operation. But the businesses that we serve, by and large, are not the kinds of businesses that banks are going to lend to. Maybe that's a credit issue from the past, maybe it's just the nature of the business. Maybe it's a start-up. Accion's definition of a start-up is 6 months of revenue. A bank's version of a start-up is three years of tax returns and a positive cash flow. Those are very big divides between 6 months of revenue and 3 years of tax returns and a positive cash flow. So I think you have to know where your business is at, know what your choices are, and make the right decision. When we're in the category of investment, whether it's angel or an investor, the questions before a business owner are very different from I need capital to grow my business. When you're looking at a partner you'd better think. Is this somebody I really want to share my dream with? Is this a good decision for my management team? Am I going to get the resource beyond the capital? And that's a much more complicated decision than I need capital, I want to buy this machine. It's going to triple the size of my business. Who's my best partner?