After The Pitch

Things to Consider Before Applying for a Small Business Loan in Ohio

I If you need a business startup loan or a small loan to grow an operating business, applying for one at the bank is the most common avenue of acquiring it. Make sure your business can secure the capital it needs by taking these measures, guaranteeing that the underwriter won’t discard your application before giving it full consideration.

Credit scores 

Assess the current condition of your personal credit score to get an idea of where you stand in the eyes of financial institutions. If your business is already operational make sure to consider the state of your business credit score as well. By being aware of your credit scores, you eliminate the risk of walking blindly into an obstacle like sub-par credit. Typically, banks will find out your FICO SBSS score and use that to determine if you qualify. The minimum score threshold for approval is usually set at 160. 

Available funds 

Whether you are seeking a loan through a private investor or bank, evidence that you are financially secure will help them confidently determine that their money will not be at risk. If you are currently employed full time, the benefactor of the loan can be sure that you have some means to pay back the loan; but if you are fully invested in your business this security may not exist in their eyes. With a relatively proportionate amount of cash or collateral on hand, a business startup loan will be easier to get approved.

Just as effectively, a business that is already generating revenue but doesn’t have much liquid cash can be granted revenue-based financing. As long as a company can realistically demonstrate its capacity for growth and the numbers all work out, revenue based financing may be an option.

Available institutions 

The institution that you choose to ask to fund your loan is important as well. If your company doesn’t seem to fit in with the standard recipient of funding from that institution, reconsider them as an option. In the Midwest, larger banks are even more likely to decline smaller loans as they are less profitable. With that in mind, find the investor that is most suited to your operation.

Prepare a business plan 

It is vital to have a business plan that accurately defines how any funds received will be spent. An exact timeline for how your business will handle repayment is key to winning loan approval.

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How Do You Put a Pre-Revenue Valuation on Your Startup?

Startups that have long-term potential for growth and profitability frequently leverage funding from investors to reach their stride.  A high probability of getting the highest return on their investment dollars is the only objective for many investors. So, how can you accommodate this need when determining a valuation for a startup that isn’t yet generating revenue?

Understanding important financial terms

Free cash flow is an accounting metric used to define financial performance, it is calculated as operating cash flow minus capital expenditures.

Post-revenue value is the value of a company after it has received financing or outside capital.

Pre-revenue value is a term widely used in the investment industry to describe, the valuation of a company that has not received outside investment or financing.

Net present value is the sum of all future cash flows.

Do the math

First, calculate your margins. Be transparent and use the most accurate iterations of your expected revenue and your expenses to get a clear representation of potential free cash flow. This is the first step to making sure your financials are in order. If they aren’t, there are not very many underwriters who will want to touch your startup (you may even consider having an accounting professional model a 409a model if your situation is exceedingly complex).

Pre-Money Valuation Formula

Pre-Money Valuation Formula

Use this data to determine your projected terminal value and return on investment (ROI) for a period between 3 and 7 years in the future. Now take the newly defined terminal value of your startup in that period and divide it by the expected (ROI) for that year. The quotient is a valid representation of the post-revenue valuation. Your pre-revenue valuation will be an amount approximately equal to the difference between your post-revenue valuation and any capital you have invested into the company. This process is far from simple, so make sure you are ready to commit a lot of time and resources to getting the most accurate numbers.

Be Realistic

Unrealistic expectations may turn an investor off to your idea entirely and you might not get another audition. This doesn’t mean that you should let investors take advantage of you. If your startup shows signs of growth, positive engagement, traction and exceptional projected revenue, never allow negotiations to remain at a stalemate.

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Your Checklist Before Approaching Investors for Your Startup

If you want to raise some investor money to build traction for your startup. That’s a good decision, but there are some factors to consider before you go looking for investors.

1.  Have An Impressive Story

You should have a great story regarding how your startup came to be and the problem that you are seeking to solve. A beautiful example is the story of the founding of Dropbox.  Drew Houston founded Dropbox after realizing he forgot to carry his memory stick while traveling from Boston to New York City and could, therefore, not work on his computer during the journey.

2.  Have A Minimum Viable Product

The MVP is a first working version of your product with limited features, and which you can show to customers and investors and therefore collect feedback.

3.  Have Users or Customers

Investors rarely put in money for untested solutions. You, therefore, need to demonstrate that there are people who want to use your product to solve the problem that you are seeking to resolve and actually pay you for the solution. Investor money shall, therefore, help you to grow.

4.  Have a Focus on profitability

For startups in the Midwest, one key thing to note is that you should show a focus on profitability the earliest as possible. This situation is unlike in the coasts where plenty of investors are willing to hold out longer before a business becomes profitable.

Checking the above four items on this fundraising checklist will help ensure that you will be on your way to raising the required capital from an ideal investor to scale your company.

Happy hunting!

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SunDown Group Partners with The Ohio State University College of Engineering To Help Ohio Manufacturers

SunDown Group has partnered with The Ohio State University College of Engineering’s Center for Design and Manufacturing Excellence (CDME) Manufacturing Extension Program (MEP) to Help Ohio Manufacturers Get the Resources They Need

MEP@OSU supports Ohio’s small and medium-sized manufacturers by providing the products, services and assistance that are dedicated to the productivity, growth and global competitiveness of Ohio manufacturers. Small and medium-sized manufacturing companies are critical to Ohio, representing 90% of job growth for high-paying jobs. This growth means for every new manufacturing job created or retained, there are 3 to 5 supporting jobs also created. From automotive to advanced materials, Ohio’s manufacturing landscape is more diverse than ever before.

MEP Ecosystem DiagramMEP@OSU, managed by the Ohio Development Services Agency’s Office of Small Business and Entrepreneurship, is a State and Federal initiative to develop and deploy technology, management and technical expertise for improving the competitiveness of manufacturing through services offered by six carefully selected regional affiliates. Within these six regions are 11 different county regions with programs such as the CDME which are responsible for industry and manufacturing development. MEP@OSU provides the CDME with funding, which in turn uses that funding to create workforce development, industry innovation, lean manufacturing, and supply chain interactions between small businesses and manufacturers.

As a statewide Industry Partner, SunDown Group provides access to our expert network, business building classes, workshops, speaker series, capital programs, and business pitch events to help small and medium-sized manufacturing companies connect with investors, mentors, and talent that they need to help take their companies to the next step. SunDown also works to help introduce qualified manufacturing companies to CDME and our other North American partners.

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Where Columbus entrepreneurs can turn for startup funds when banks say no – Columbus Business First

There are myriad challenges for those trying to launch a business, and landing bank financing may be the toughest task of all. Just ask Ben Morgan, owner of Old North Arcade in Columbus.

SunDown Group was quoted in this article on alternative sources of finding resources to launch your business.

Source: Where Columbus entrepreneurs can turn for startup funds when banks say no – Columbus – Columbus Business First

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People: Blk Hack brings resources to African-American entrepreneurs

Columbus is full of young creatives with seemingly endless ideas for business ventures. Luckily, these budding entrepreneurs have places to go in the city to present and cultivate their visions. But twin brothers Branden and Bruce Jones, 31, noticed that certain demographics are often missing from these settings… The next event, “The Art of Design, Build and Pitch,” will take place Monday, Sept. 19 at Rev1 Ventures, a venture development organization that hosts all Blk Hack events. The panel will include user experience and user interface designer Natalie Howard, startup business consultant Robert Nicholson, Soulo Theory Creative Owner and CEO Marshall Shorts and Paul Proffitt, founder of SunDown RunDown, which hosts pitch events and provides resources for entrepreneurs. The September event will focus on getting a concept past the idea stage and in front of investors.

Source: People: Blk Hack brings resources to African-American entrepreneurs

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An Appeal for Support

The SunDown Community is over 2,000 strong.
Together, we can make anything happen.

The SunDown Community needs your help.  Since starting with just one event in Columbus, OH and watching it grow to six chapters around the State of Ohio over the past three years, really shows the power of the community that entrepreneurs, investors and mentors have built together throughout Ohio.

With almost no operating capital and a group of dedicated volunteers, we have been able to host over 350 entrepreneurs pitch their business ideas and make connections.  Through this movement, we have been able to attract over a dozen experts that have donated over 200 hours of their time to meet with entrepreneurs, conducted over 120 workshops and classes, and through connections have been able to help entrepreneurs find over $1.12 million in funding.

We have a very vibrant and engaged community.  In the past I have taken this fact for granted, but now I see that the energy from this community that we built can be focused.  With your help, we can really move things forward in the Ohio entrepreneurial community and set the course.

In order to take our SunDown community forward, I am asking you for three, very specific things:

  1. Make a charitable donation to The SunDown Foundation of $25 or more. We have asked our 2,000+ strong community to give at the $25 level, which will allow us to raise over $50,000. Additional support from you will help us take our organization to the next level.

  2. Join the SunDown Investment Club on WeFunder. It is free to join and you don’t have to invest in any deal that the club recommends.   We have a goal to get up to 200 members into the club so that we can easily help other Ohio companies get the funding they need to be successful.  And on the plus side, your constituents might be able to put a few bucks back into their pockets too.
  3. Join the SunDown Team on Kiva. Again, totally free and you don’t have to participate in backing every single company. It’s a great way to help out Ohio startup companies. Our goal for our Kiva team is to reach 200 members to really make a large impact in Ohio.

The SunDown Community is making a tremendous impact in Ohio.  With your help we can keep making an impact and help all Ohio entrepreneurs be what they want to be.  Your support of SunDown will show that you care about the economic future of Ohio and support entrepreneurship and small business.

We truly are all stronger together.


Paul Proffitt
SunDown Group

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