no such thing as free money
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Despite the rhetoric and in-fighting, the United States is a great country. Everyone has the opportunity to be who and what they want. The liber- ties enjoyed by all are unequaled in the world. But as we all chase the American dream it needs to be made clear that although you have the right to pursue happiness, it is not guaran- teed.TRANSCRIPT
No Such Thing as Free Money� This article is a re-printed from the�October 2011� edition, as approved by the�
UP Business Today�
By David Saint-Onge�
Despite the rhetoric and in-fighting,�the United States is a great country.�Everyone has the opportunity to be�who and what they want. The liber-�ties enjoyed by all are unequaled in�the world. But as we all chase the�American dream it needs to be made�clear that although you have the right�to pursue happiness, it is not guaran-�teed. This is the quandary many�aspiring entrepreneurs find�themselves.In a capitalistic society,�money remains an integral ingredient�in the recipe for success. In essence,�it takes money to make money. And�although Americans come from dif-�ferent socio-economic backgrounds�and personal situations, the truth is�America still provides the same in-�centives and opportunities regardless�of your situation or status. For aspir-�ing entrepreneurs, too many find�themselves being bombarded with�the feel-good story of 2011; if you�cannot find a job then America will�give you every opportunity to go into�business for yourself. This perpetual�marketing spin goes on relentlessly�in all forms of media and has become�the mantra proclaimed by local, state�and the federal government. But�amid the risky times of the day,�tougher lending standards are forcing�a growing number of small-business�borrowers to seek federal govern-�ment loan guarantees to help loosen�
the purse strings at the local bank.In�an article by Angus Loten published�on September 16, 2011, in the Wall�Street Journal titled, When Govern-�ment Backs your Business Loan,�there are some staggering statistics�on the issue of federally-backed�loans. As the end of the federal fiscal�year nears at the end of September,�the Small Business Administration’s�(SBA) two main lending programs�have already surpassed a record-high�$18 billion in guaranteed loans is-�sued through banks and other con-�ventional lenders. That’s more than�double the full-year total in 2009.�And, depending on the size of the�loan, SBA loans are guaranteed for�up to 85% against default.But despite�the opportunity presented by the�SBA, there are simple realities that�aspiring entrepreneurs must keep in�perspective. First and foremost,�these loans are no different than any�other bank loan. Even though it is�backed by the full faith and credit of�the United States government, the�business model employed by the en-�trepreneur must have the ability to�cover the debt load. Although this�may sound simplistic, the reality is�that many aspiring entrepreneurs ac-�tually think this money is free. Don’t�laugh, it’s true. With all levels of�government pushing entrepreneurial�efforts as a fix to our ailing economy,�the message and facts have been�blurred. Too many economic devel-�
opers don’t talk about the economic�realities of life; loans have to be re-�paid.�
Another issue is that of collateral.�Money is loaned against other fixed�assets and/or the ability to pay. Loan�applicants must still be bankable,�even if the loan is guaranteed by the�government.�
And finally, there is that little pesky�issue called the down-payment. In�the not-to-distant past, you could get�money with almost no collateral and�next to nothing down. Those days�are gone and now loan applicants�need to have at least that 15% neces-�sary to secure even an SBA loan.�That’s $15,000 for every $100,000�borrowed. In short, despite the proc-�lamations throughout the media, you�have to have some money to get more�money. In the end, as the economy�continues its lifeless existence, loan�decisions hang on the business�owner’s character, management ca-�pability, collateral, and equity contri-�bution. There is no such thing as free�money.�
David Saint-Onge serves as Presi-�dent of The e-Loft�(www.theeloft.com), an entrepre-�neurial support company providing�consulting/coaching, business edu-�cational programs, and venture cap-�ital coordination services for The Big�Chair Club, LLC.�