While much attention has been focused in recent years on startups raising money from venture capital and private equity funds, another source that should be considered are local community banks (CBs). Photo credit: ptmoney.com Photo credit: ptmoney.com
Over the years I have found these banks to be a valuable and reliable avenue to obtain debt for ventures that meet their lending criteria. In my experience, CBs usually have a two part test before they lend money. First, they look for strong collateral that is located in their geographic area, such as real estate, inventory, receivables, or equipment, and will lend up a percentage of the value of these assets. This percentage can vary but frequently centers around 80%. Second, the business should have sufficient cash flow to adequately and easily service the debt.
