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Now What?

lisaloolisaloo subscriber Posts: 1
edited November 2006 in Startup Funding
Hi to all and thanks for all the wisdom shared here.  First time post, long time lurker. 
Here is my dilemma - probably not all that unique:
I have a terrific start-up retail concept, and have devoted the better part of the past eighteen months to developing my business plan - a difficult but very rewarding process, to say the least.
This summer, I made three trips to the local SCORE office and now feel as ready as I`ll ever be to aggressively pursue the majority of the start-up funding.  If I want to avoid being under-capitalized, I would need about $200K. (Actually, I`d be more comfortable with $300K, but I can make it work for less.)
My FICO is over 800, and I am fortunate to have a lucrative and flexible day job that I will hang onto as long as possible.
So what`s the problem, you ask? 
Well, in a perfect world, I`d have my owner`s injection of $70K sitting in the bank earning interest, but I just went through a divorce and wound up paying off his debts and giving him a settlement.  He more or less held me hostage financially this past year because I outearn him by quite a bit -- so I "bought" my freedom to get it over with and avoid future support and legal costs.
So . . . I`m cash poor, but I have perfect credit, strong monthly income and very low installment debt (car and house only) . 
I know that I need to move on my idea NOW -- the perfect location is up for sale, the concept is enthusiastically received by lots of potential customers -- but I don`t have any of my own capital left to work with.  I used the Circle Lending guidelines to draft a possible loan schedule to borrow the seed money from my father, only to discover that he lost about $125K to his wife`s cousin a few years back and is understandably gun-shy - even with his own daughter.
I could sell my house, but I`d rather not put it on the market until the spring.  I only bought it a year ago and don`t have any real equity built up yet, and in a shaky market I don`t want to take a loss if I can avoid it.
My question is this - more or less:
Is there a way to secure SBA or other start-up loans using one`s credit and ongoing/future income as "collateral"?
Or should I try to pull this off by truly bootstrapping it and running up credit card debt and the like?
Any thoughts or insights would be greatly appreciated.  It seems that everywhere I look, someone opens another store in this area and it`s driving me nuts knowing that my store would not only thrive, but bring a lot to the community.
I`m more than willing to take risks, but don`t want to do anything foolish if a better alternative exists. 


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    asykesasykes subscriber Posts: 3
    Lisa,Try to avoid credit card debt, but perhaps you can get a good rate on a small personal loan and look at bootstrapping.Bootstrapping or at least considering bootstrapping can be a very useful exercise as it helps you to view other routes to market and generally gives you a better overview of your sector.You may decide that there is a good reason not to bootstrap, but better to look at it and have a good reason to ignore than simply to not look!Very best of luck with it all, and remember to keep us all up to date with how you go...
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    robertjrobertj subscriber Posts: 0 Member
    Most SBA lenders want you to put some capital (typically 20%) and don`t want you to borrow it. You`ve got a lot of good things going for you and it`s not a simple either/or situation (either the SBA or credit cards) 
    There are possible options - depending upon the specifics of your situation.
    I`ll be glad to discuss them with you via private message.
    Robert Johnson
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    lisaloolisaloo subscriber Posts: 1
    Thanks so much, Asykes.
    I listened to the podcast about the SBA and heard them warn against HELOCs, etc.  I don`t yet have the equity in the house to pursue that route anyway, but worry that a personal loan - while better than using a credit card - might be similarly ill-advised . . .? 
    I have no problem with bootstrapping, provided I can find and leverage the amount of cash I need to get things off on the right foot -- and not find myself committed and moving toward opening only to run out of money and unable to properly market and purchase inventory.  Most of the products retail at 2x and 3x wholesale, but many of the lines require substantial initial orders.  (The first buy requirements vary in this industry - anywhere from $17K to $70K, depending on the line.  This is why I`m looking at an initial outlay of up to $125K in start-up inventory and fixtures.)
    Simply put: in this sector, you can probably start smaller than I`ve planned to, but you`ll get killed if you do anything too cheaply or take too many shortcuts.  It`s an appearance and image-driven business by design, and you have to be very careful to prevent the seams from showing.  Charm is one thing . . . cheap is another.  If only I could run this out of my basement for a year - everything would be different!
    Anyhow . . .can you share how you`d define a "small" personal loan?  $30K, $50K?  Or are you talking about much less? 
    And do you (or anyone) happen to know if the SBA would guarantee a loan where the investor`s contribution was derived from another loan?
    Again, thanks much.
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    lisaloolisaloo subscriber Posts: 1
    Thanks, Robert.  Check your inbox for a PM from me!
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