Courageous or Crazy?

An $800,000 loan to open an antique superstore. Financing of $200,000 for a full-service restaurant. Half-a-million dollars in private equity.

The money to start a small business can come from many sources. But small-business owners will tell you that borrowing to start the business can be harrowing.

“It was just probably two years of a constant feeling of ‘I’m gonna throw up,’ for lack of a better term,” said Jeff Brinkhoff, president of Mount Vernon-based Red Monkey Foods, which was on the hook for $500,000 two years into its startup.

Keeping an upbeat attitude is key, say many small-business owners, since most small businesses take three to five years to achieve profitability.

Remaining positive was easier for legal notices publisher Jeff Schrag after signing for a $400,000 U.S. Small Business Administration-backed loan in 1995 to purchase The Daily Events.

“At that time, I didn’t really have anything,” Schrag said. “Risking everything I owned really didn’t bother me.”

Schrag has gone to the SBA and other lending organizations several times during his business and downtown development career, which spans eight ventures. Most recently, Ozark Mountain Brewery LLC, a company formed by Schrag, obtained a $1.5 million SBA-backed loan through Liberty Bank for a brewery in the old Interstate Brands Bakery, or Butternut Bread, site at 727 W. Walnut St.

Brinkhoff’s company was backed with a $500,000 loan from Springfield private equity firm Quest Capital Alliance between 2004 and 2009.

Brinkhoff started the spice company in 2002 after returning to Missouri from Colorado, where he worked in sales since graduating college. He started the business in a 900-square-foot dairy barn on his family’s farm in Golden City. With 2009 revenues of $4 million and 2010 revenues on pace for $8 million, the company has traveled a long way to its 40,000-square-foot warehouse and production plant.

The journey has not been painless for Brinkhoff.

“Am I going to disappoint the investors, am I going to disappoint my family, am I going to fail?” Brinkhoff recalled thinking. “What I needed to do was convert all that fear into positive, shut up and do it.”

Rewards outweigh headaches
Small-business borrowers should have a strong belief in their business plans, said Beverly Robb, owner of Relics Antique Mall LLC.

Robb, a small-business owner of 15 years, borrowed $863,000 in SBA funds through Rural Missouri Inc. to help start Relics in Springfield, her third antiques store. She also owns stores in Mount Vernon and Fort Worth, Texas. The 90,000-square-foot store at 2015 W. Battlefield Road, has been open for eight weeks.

She said potential borrowers should expect “a mountain of paperwork” for an SBA loan approval.
Robb defined an ideal small-business owner as someone with a solid idea of the direction of their lives, coupled with strong commitment.

“You have to be willing to put in the hard, hard work – the time – and drain yourself financially,” Robb said.

“You have to believe in your idea, so much so that you put everything on the line financially – maybe a crazy person, I don’t know,” she joked.  

But for Robb, the rewards far outweigh the headaches.

“Having said that, it’s definitely rewarding. It’s wonderful to see your idea come to fruition,” she said. “I absolutely can’t wait to come to work every single day.”

What lenders look for
When lenders consider potential small-business owners for loans, two key components are considered, according to Rebecca Harmon, an accountant with Kirkpatrick, Phillips & Miller CPAs.

“Some will be happy with just having a copy of tax returns and looking at that. Others are going to want a set of financial statements,” Harmon said.

Harmon was one of three speakers at an Aug. 4 Springfield Area Chamber of Commerce event to help business owners better understand their financial records.

For a new business, more details are necessary, including a plan for sustainability, Harmon said.

“In some cases, I’ve seen them do a three-year plan, a five-year plan,” Harmon said. “I think they’re looking for just a plan for how with revenues and expenses are projecting, how they’re going to be able to sustain those numbers until the business gets to where it’s making revenues – a plan for keeping it going until you’re up and going successfully.”[[In-content Ad]]