Prudence pays when building a business – Plan and save to get your business off the ground, successful businessman advises

Double G Engraving & Awards owner Gary Morin knows the power of a good credit rating — and the work it takes to keep it.

"My credit is impeccable, and I am so protective of that," Morin said. "There’s value in that."

By BETH BRITTON
Tribune Business Editor

The value, Morin argues, lies in the fact that he has been able to grow his business without worrying about whether a bank will work
with him in securing the necessary funds.

Last year, Morin moved his business to the new Morin Professional Building at 608 2nd St. S.

For Morin, expansion came not as a result of huge loans, but from years of hard work — starting small, growing only as he could
afford to and saving money every step of the way.

For many potential business owners, finding the money to pursue a dream can be one of the most nerve-wracking steps in their quest
to be their own boss.

But there are options for just about every business owner — including the methodical, prudent approach Morin took about 13 years
ago when he started the engraving business in his kitchen.

He started the business with his own money and grew it slowly — taking out few loans over the years.

"I took very little out of the business for the first five years; I totally reinvested back into the business," he said. "I controlled the
business’ growth."

Morin recommends preparing years in advance to be in the best possible position to finance one’s business.

"Start saving so that you can live on almost nothing from that business for a while, because that’s what you’re going to have to do," he
said. "Be prudent and have an escape route for the worst case scenario."

Relationships

No matter how much of one’s own money is invested in a business, it is wise to develop a working relationship with a financial
institution, Morin added.

Banks and entrepreneurs should be partners well before the business opens its doors, said Tracey Jette, the director of the U.S.
Small Business Administration’s Small Business Development Center in Havre.

The SBDC assists people in determining the right financing structure for individual projects. SBA programs include micro-loans for
start-up businesses — $35,000 maximum.

In fiscal year 2002, the SBA loaned roughly $6.9 million to 28 businesses in Cascade County.

"If you are good at managing your personal financial assets, that reflects on how well you’ll be able to manage a business," Jette said.

Jette cautions that even with the best of credit and the most successful of banking relationships, the best move potential business
owners can make is to have a solid business plan, including three years of income and expense projections.

"I think a business plan is imperative to business success," she said.

"There’s more documentation required than there used to be; the banks want to be convinced that a business will succeed."

A bank’s perspective

As banks evaluate the probability of success for any would-be business, entrepreneurs’ personal financial lives are thoroughly
examined, said Kelly St. Onge, assistant vice president at Mountain West Bank.

"They need to have a business plan we can look at, and we also look at their income, their financial statement and their tax returns, "
St. Onge said. "The business is only as good as the person running it, and if the person doesn’t have a good credit history to begin
with, the bank won’t be willing to step out on a limb."

Once business owners have been approved for a loan, a mistake many of them make, he said, is borrowing too little.

"A lot of times people want to finance as little as possible, and they use all their working capital to fund the costs of starting their
business instead of running their business," he said. "A lot of people expect to hit peak sales right away, and they don’t have the
money to get through the start-up period."

According to the SBA’s Office of Advocacy, two-thirds of new businesses survive at least two years. Half of all new businesses are
open after four years, and 40 percent are open after six years.

Options

For new or existing businesses in need of small loans, a new program from Innovative Bank of California aims to fill a niche.

Great Falls resident Nancy Snow, a former business owner who now represents Innovative Bank in Montana, Wyoming and North
Dakota, works alongside local financial institutions and the SBDCs to help provide the small loans that are often unavailable
elsewhere.

The loans are available in three amounts — $5,000, $10,000 and $15,000.

"It’s a much more user-friendly program than anything else that’s out there because it doesn’t require a business plan or tax returns,"
Snow said. "They’re commercial loans based on personal credit."

Snow said the loans, which are guaranteed by the SBA, are not designed to replace traditional financing; instead, they are designed
like gap financing and can be used in conjunction with other funding sources.

"These are small loans for working capital, and I end up with lots of clients that banks turn down," she said.

High Plains Financial Inc., the financial arm of the Great Falls Development Authority, is in the process of setting up a micro-loan
program in conjunction with the SBA, said Director Jim Kaitschuck.

Within the next four to six months, there will be $500,000 available for loans of up to $35,000, he said.

High Plains also will have revolving loan funds available for use in Great Falls and Cascade County, he said.

The smaller loans won’t finance new buildings or major expansions, he said, but they will allow businesses to purchase new
equipment and make smaller improvements that are needed right away.

"We don’t try to replace the banks; we can reduce the risk for the bank and get a project done that wouldn’t be done otherwise,"
Kaitschuck said.

Perhaps the most important thing High Plains will offer is the technical assistance after the money is in the hands of a business, he said.
And if business plans and personal financial statements are not sufficient, Kaitschuck said he isn’t shy about saying so.

"Sometimes when I talk to them, I tell them they aren’t ready for this. You don’t do anybody a favor by making them a bad loan."

Many business owners turn to their credit cards as a short-term financing solution. It can work so long as the outstanding balance can
be repaid quickly to avoid high interest rates.

Entrepreneurs also often turn to those closest to them to help them get their business off the ground, but the SBDC’s Jette advises
people to approach that solution with caution.

"I would make sure that everything is in writing, even if it’s friends and family," she said. "Sometimes emotions get involved."

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