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> Most of the new business investment infrastructure is around them. Would be interesting to hear how fellows HNers see this situation in their country. In Fin

by kakoni 7y ago

> Most of the new business investment infrastructure is around them. Would be interesting to hear how fellows HNers see this situation in their country. In Finland its pretty difficult as a new business to secure loan from bank (unless you are willing to put your house or other tangible assets as collateral)

gumby 7y ago
This is pretty common in most OECD countries including USA. If you are opening a shop or restaurant that's about your only alternative to asking your friends. In the US if you are expanding your shop to a few sites, or doing a "concept" (e.g. Jamba juice) you can look for some professional money, as I mentioned, but the process is just as painful as a bank. All those people want you to put some of your own money in to show that you are committed. The money being lent out is often a large proportion of the lender's capital. For PE (incl VC) the partners typically put up only a nominal amount of capital -- they are investing their customers' money. So requiring an investment by the company founders is an unnecessary requirement that could be a barrier to a good deal happening. The positive side of this is that these investors are more concerned with upside than downside. Investors in Europe and Australia are mostly more worried about losing money than gaining some.
adventured 7y ago
In the US it's very difficult to get a bank loan for a new small business, unless you have strong collateral to put behind it. Banks gradually became not-so-great sources for small business lending in the post WW2 era; essentially as bank lending fully switched from being personal, with some influence for community relationships and reputation, to being almost strictly based on formula. As an alternative, the US has many types of government small business loan programs (meant to stimulate industry), along with private sector versions, for just about every business type and scenario. Some are easy to get (typically smaller), most require that you go through annoying and drawn-out processes to get. You have to deal with the bureaucracy basically. The US has an agency called the Small Business Administration, which works with lenders and provides loan backing. One of their requirements in their loan programs is that you demonstrate an inability to get lending from any other financial lender. Then there are small business grants that federal and state government provide, again to stimulate industry. I suspect most developed economies have versions of these types of programs.
- gumby 7y ago
  Not to contradict anything you wrote (I agree with it all) but thought I’d add a little nuance: > Banks gradually became not-so-great sources for small business lending in the post WW2 era; essentially as bank lending fully switched from being personal, with some influence for community relationships and reputation, to being almost strictly based on formula. This formulaic shift helped people who might not fit the “community” model, e.g. black people in towns where all the bankers were white (which was all town post WWII).

by kakoni 7y ago

gumby 7y ago

This is pretty common in most OECD countries including USA. If you are opening a shop or restaurant that's about your only alternative to asking your friends. In the US if you are expanding your shop to a few sites, or doing a "concept" (e.g. Jamba juice) you can look for some professional money, as I mentioned, but the process is just as painful as a bank. All those people want you to put some of your own money in to show that you are committed. The money being lent out is often a large proportion of the lender's capital. For PE (incl VC) the partners typically put up only a nominal amount of capital -- they are investing their customers' money. So requiring an investment by the company founders is an unnecessary requirement that could be a barrier to a good deal happening. The positive side of this is that these investors are more concerned with upside than downside. Investors in Europe and Australia are mostly more worried about losing money than gaining some.

adventured 7y ago

In the US it's very difficult to get a bank loan for a new small business, unless you have strong collateral to put behind it. Banks gradually became not-so-great sources for small business lending in the post WW2 era; essentially as bank lending fully switched from being personal, with some influence for community relationships and reputation, to being almost strictly based on formula. As an alternative, the US has many types of government small business loan programs (meant to stimulate industry), along with private sector versions, for just about every business type and scenario. Some are easy to get (typically smaller), most require that you go through annoying and drawn-out processes to get. You have to deal with the bureaucracy basically. The US has an agency called the Small Business Administration, which works with lenders and provides loan backing. One of their requirements in their loan programs is that you demonstrate an inability to get lending from any other financial lender. Then there are small business grants that federal and state government provide, again to stimulate industry. I suspect most developed economies have versions of these types of programs.

gumby 7y ago
Not to contradict anything you wrote (I agree with it all) but thought I’d add a little nuance: > Banks gradually became not-so-great sources for small business lending in the post WW2 era; essentially as bank lending fully switched from being personal, with some influence for community relationships and reputation, to being almost strictly based on formula. This formulaic shift helped people who might not fit the “community” model, e.g. black people in towns where all the bankers were white (which was all town post WWII).