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> Silicon Valley Bank declining to talk to us about a line of credit since we aren’t VC backed—even though our profitability, cash on hand, and growth are far b

> Silicon Valley Bank declining to talk to us about a line of credit since we aren’t VC backed—even though our profitability, cash on hand, and growth are far better than most VC backed startups. Going from the VC world to bootstrap has been a night and day experience for me at the new gig. It's surprising how hard it is to get credit lines established, even if you are shedding cash.

nathanbarry 10y ago
Yeah, now that we have a decent amount of cash on hand Wells Fargo and other banks have offered to reconsider on smaller lines of credit ($100k).
- deleted 10y ago
  [deleted]
- cabinguy 10y ago
  Go to a small bank. I'm a bootstrapper and I have lunch every couple of months with the owner/ceo of the bank we do business with. They have about 25 branches within their family (under 2 brands). Small banks still do business the old fashioned way. Credit isn't an issue if your cash flow supports it. The best (banking) move we ever made was switching from a huge bank to a small bank.
  - soundlab 10y ago
    Fellow self-funded biz here, definitely agree with this. Go with a small local/regional bank. Start small and grow with the LOC. Depending on how involved the loan officer group is, you may get some great CFO-type advise / dashboard review out of it. Even if they're not typically doing hot SaaS businesses, they know the fundamentals and growth stages of small businesses inside and out, regardless of industry.
  - ChuckMcM 10y ago
    This is really solid advice. Small bankers are interested in actually banking. I know that sounds silly but the larger "big name" banks are answering to a different master (no I'm not sure who that is, but it certainly isn't the small to medium business customer!)
    - amorphid 10y ago
      Just don't get too addicted to that line of credit. If the bank yoinks your ability to borrow when cash is tight, you'll be hurting.
fizx 10y ago
It gets better after a year or two of consistent monthly cash flow through one account, but $diety help you if you ever want to switch banks!
- kordless 10y ago
  $deity == that who controls the infinite compute.
gumby 10y ago
SVB outsources deal analysis and DD to a set of VCs they trust by only investing in companies those VCs back. A lot of lenders do this. There are VCs who operate the same way, e.g. Correlation ventures or DAG Ventures.
cm2012 10y ago
Rule of thumb with getting funds from online business lenders is that you can get 10% of your revenue as a loan or LOC.
joe_the_user 10y ago
The thing is that a bank is a "very staid institution" A bank only understands an ordinary business with ordinary assets that can be liquidated if stuff goes, as well as an ordinary niche in a well-known sort of market. How much money you're making now is an impressive statistic to you. How long you have been making a steady amount is the figure a bank you be most concerned with but even, them knowing why you've made this money is important since there are lots of ways to seem like you are getting money. A bank doesn't have the resources to research the particularities of an online business - or probably any business that doesn't have a significant history of making money. Really, banks don't research at all, they simply follow procedures, which is how they can operate on a mass scale.
rando18423 10y ago
They lend based on the 5 C's, anything else is considered speculative. Cash flow is the starting point and is nice, but even in college I was approved for a credit line from Chase... Up to about 85% of the value of our single asset, which they required us to pledge as collateral. The asset was a fairly popular model of a bus :)
techbio 10y ago
"Shedding cash" seems slightly obscene. Great phrase though.
- kordless 10y ago
  If you think that's obscene, you should see the stuff that comes back in returns we keep for ourselves after refunding the customer. It's all relative though. What seems like a lot of revenue to us is peanuts compared to these larger VC startups.
techbio 10y ago
"Shedding cash" seems slightly obscene. Great phrase though.

nathanbarry 10y ago

Yeah, now that we have a decent amount of cash on hand Wells Fargo and other banks have offered to reconsider on smaller lines of credit ($100k).

deleted 10y ago
[deleted]
cabinguy 10y ago
Go to a small bank. I'm a bootstrapper and I have lunch every couple of months with the owner/ceo of the bank we do business with. They have about 25 branches within their family (under 2 brands). Small banks still do business the old fashioned way. Credit isn't an issue if your cash flow supports it. The best (banking) move we ever made was switching from a huge bank to a small bank.
- soundlab 10y ago
  Fellow self-funded biz here, definitely agree with this. Go with a small local/regional bank. Start small and grow with the LOC. Depending on how involved the loan officer group is, you may get some great CFO-type advise / dashboard review out of it. Even if they're not typically doing hot SaaS businesses, they know the fundamentals and growth stages of small businesses inside and out, regardless of industry.
- ChuckMcM 10y ago
  This is really solid advice. Small bankers are interested in actually banking. I know that sounds silly but the larger "big name" banks are answering to a different master (no I'm not sure who that is, but it certainly isn't the small to medium business customer!)
  - amorphid 10y ago
    Just don't get too addicted to that line of credit. If the bank yoinks your ability to borrow when cash is tight, you'll be hurting.

fizx 10y ago

It gets better after a year or two of consistent monthly cash flow through one account, but $diety help you if you ever want to switch banks!

kordless 10y ago
$deity == that who controls the infinite compute.

gumby 10y ago

SVB outsources deal analysis and DD to a set of VCs they trust by only investing in companies those VCs back. A lot of lenders do this. There are VCs who operate the same way, e.g. Correlation ventures or DAG Ventures.

cm2012 10y ago

Rule of thumb with getting funds from online business lenders is that you can get 10% of your revenue as a loan or LOC.

joe_the_user 10y ago

The thing is that a bank is a "very staid institution" A bank only understands an ordinary business with ordinary assets that can be liquidated if stuff goes, as well as an ordinary niche in a well-known sort of market. How much money you're making now is an impressive statistic to you. How long you have been making a steady amount is the figure a bank you be most concerned with but even, them knowing why you've made this money is important since there are lots of ways to seem like you are getting money. A bank doesn't have the resources to research the particularities of an online business - or probably any business that doesn't have a significant history of making money. Really, banks don't research at all, they simply follow procedures, which is how they can operate on a mass scale.

rando18423 10y ago

They lend based on the 5 C's, anything else is considered speculative. Cash flow is the starting point and is nice, but even in college I was approved for a credit line from Chase... Up to about 85% of the value of our single asset, which they required us to pledge as collateral. The asset was a fairly popular model of a bus :)

techbio 10y ago

"Shedding cash" seems slightly obscene. Great phrase though.

kordless 10y ago
If you think that's obscene, you should see the stuff that comes back in returns we keep for ourselves after refunding the customer. It's all relative though. What seems like a lot of revenue to us is peanuts compared to these larger VC startups.

techbio 10y ago

"Shedding cash" seems slightly obscene. Great phrase though.