“Making the pitch: Woman-owned businesses face distinct challenges when looking for financing”

Nashville Business Journal, by Jessica Howard, September 30, 2002

When Karen Hall wanted to start her own bookkeeping service 12 years ago, her banker insisted that she have her then-husband co-sign a relatively small loan as well as put up her one-year-old Acura as collateral.

"There were no two ways about it," the self-proprietor of KT Bookkeeping recalled. "My credit was perfect. Why would my husband have to sign (a 90-day note) for my business?"

While this particular scenario is less likely to happen in 2002, securing financing is still one of the greater challenges women face when looking to start their own business.

"Today the issue is how to get women into the equity market. Experiencing a slow economy, the ability to access capital is generally not good for start-up companies, which are generally viewed as higher risks by the investment community," says Barbara Garvin, director of the Center for Entrepreneurship at Belmont University.

Garvin says that the biggest disadvantage women face in trying to access capital is that overall they have had less experience than their male counterparts with the ins and outs of financing.

"It is not so much a question of whether it is more difficult for women to get start-up money as it is whether women understand the fund-raising process," she says.

She touts initiatives like the programs at Center for Entrepreneurship as an important resource for women looking to educate themselves about what it takes to start a business. The center hosts a variety of seminars that give women the tools needed to start a business.

"There has been improvement in the quality of education available to women on access to capital. Women have more available information of how to tap into capital," Garvin says.

A thorough business plan can be one of the most effective tools in seeking start-up capital. Using the business plan in a pitch helps keep a business on track and shows that the would-be entrepreneur is prepared, says Yonnie Chesley, CEO and president of Gordian Health Solutions Inc. and chair of the board of advisors of the Center for Entrepreneurship.

"It's a very painful exercise," Chesley says. "It forces you to think through the business."

Laura Campbell, president and CEO of Laura Campbell & Associates, says that when talking to investors, whether it's a bank or individuals, it's essential to convince the decision makers on how you are going to make them money.

"These folks are in the business of investing and making loans to make a superior return on investment for themselves," says Campbell, who also sits on the board of advisors at the Center for Entrepreneurship.

She uses a baseball metaphor to describe the different types of pitches that can be used when seeking capital.

"I call it the fastball when you have a limited period of time and you need to be able to deliver a quick synopsis of your business. What you do to hit all they key selling points. The slowball is a 10-minute or so discussion that is very detailed."

Campbell says that regardless of how great your business plan and presentation is, it still may take at least dozen tries before you get a yes.

"Persistence is important. In one study, successful fund raisers contacted more than 15 institutions, so don't quit," she says.

She also recommends would-be business owners do their homework on potential lenders or investors to make sure goals are compatible.

"If you are an early-stage tech company, it's usually a waste of time to talk to a latter-stage health care fund, because investment firms tend to have distinct preferences as to stage of investment and industry type."

It's also important to make sure that before you get a commitment for start-up capital, you've researched the institution's or investor's reputation and investment performance to determine the potential value to your company in working with that particular source of capital.

"A relationship with a private equity investor is much like a marriage, and as we all know, the divorce rate is pretty high," she says.

And, Campbell says, never lose the upper hand.

"Manage your cash so you're not desperate when you are seeking funding. When you are desperate, your bargaining position is not as strong."

Hall, who had such a hard time getting financing a little more than a decade ago, says that even simple tactics, such as approaching a female banker, makes securing a lender a less daunting process.

She also believes joining an organization where women network with other women gives them much-needed support while in they're in the early stages of securing capital.

"When you're going into business, you really feel like you're out there alone," she says.