STANTON — When Ken and Dawn Stoll decided to purchase a home care service franchise, they did their research.
The Stolls looked at the top 12 companies in the country and chose ComForcare Home Care, a nonmedical home care agency for senior citizens and those needing help at home.
They had taken a business franchise class at Montcalm Community College (MCC) to learn some of the basics.
The Stolls used their savings to fund the start-up costs of the Stanton business. They also created an extensive business plan to present to various banks for a line of credit to keep their cash flow positive.
The Stolls went to five banks. They were immediately turned down by two, which did not do small business loans. The Stolls negotiated between the other three banks for the best rate.
“The (MCC) class taught us that banks can be like car dealers, meaning negotiable,” Ken Stoll said. “We got the best rate and super service at Isabella Bank and took out a line of credit with them. And they have been super.”
Banks and government
David Seppala is the vice president of Isabella Bank in Greenville. He said there are numerous financing sources available to small business hopefuls, including banks, the government or a combination of both.
Seppala cautioned banks and most government financing programs are not in the business of “true” venture start-up capital. He said many government programs offer counseling and mentoring programs to help entrepreneurs solicit their “pitch” for venture financing from friends and family.
Seppala said once this process begins or equity is invested into the business or project, the bank and other government programs can look at how the request can fit into the individual guidelines for either bank or government underwriting.
“I would like to stress that most programs require personal guarantees of the owner and how they handle their personal obligations in the past,” Seppala said. “This has a very big bearing on their ability to get any financing either from the bank or a government program.”
Plan and risk
Seppala suggests submitting a comprehensive business plan as the first step in obtaining a commercial loan. He recommends taking advantage of organizations that help individuals prepare a business plan at little or no cost, including the Michigan Economic Development Corp. (MEDC), Michigan Small Business Technological Development Center (MI-SBTCD) and SCORE (a nonprofit association dedicated to educating entrepreneurs and helping small businesses start, grow and succeed nationwide).
“We find that a better prepared plan not only helps new entrepreneurs, but also established businesses which usually ensure success or options to improve in the future,” Seppala said.
The timeline for financing a small business depends on the complexity of the request and the detail of the business plan, but generally the timeline can be fairly quick, according to Seppala. He said lenders take the following items into consideration before approving financing:
• The depth of the business plan and whether its realistic or obtainable.
• The repayment source.
• A secondary source of repayment if a primary source of repayment is not established.
• Personal credit history.
• Collateral to support the request (liquidation value).
Regarding personal finance risk, Seppala said an entrepreneur will typically be required to guarantee the loan either through the bank or a government program. He said in a majority of these cases, the guarantee is secured by personal assets, such as a home or vehicle.
In addition, life insurance is typically required to match the requested loan as the success of the business is dependent on the entrepreneur being able to achieve the goals of the project.
When the Stolls opened ComForcare Home Care in Stanton last February, they began with one client and one caregiver. They now have 37 clients and 40 employees (mostly part-time).
They are contracted with four Medicaid agencies covering Clare, Clinton, Gratiot, Isabella, Ionia, Montcalm and Newaygo counties, as well as with the Michigan Department of Human Services statewide.
“Our business has grown beyond our expectations and projections that we presented to the banks,” Ken Stoll said.
For more information about financing a small business, contact local Chambers of Commerce or the following agencies:
• Small Business Administration, www.SBA.gov
• MEDC, www.michiganadvantage.org
• MI-SBTCD, www.misbtdc.org
• Montcalm Alliance, www.montcalmalliance.com
• Montcalm Community College, www.montcalm.edu