I really haven't had too many heroes in my life.  My dad was certainly a hero of mine.  Frank Seibert, my old boss and veteran of the Vietnam War, also would qualify.  President Reagan would be another.  However, I learned fairly early that, for the most part, celebrities, politicians and athletes don't always make great heroes.  John Wooden, long-time coach of the UCLA Bruins basketball team is the exception to that rule.  My dad loved the "Wizard of Westwood," and, as I grew older, learned to love him as well.

Coach Wooden developed the Pyramid of Success (see above...http://www.coachwooden.com) and used it to manage and mold young men's lives at UCLA from 1948 to 1975.  Imagine a philosophy that worked equally well with post World War II college students as it did with radical hippies (Remember Bill Walton?) in the late 1960's and early 1970's.  Coach Wooden won 12 national championships with UCLA and also had an 88 game winning streak from 1971 to 1974.  His players revered him and stayed in touch with him until is death in 2010 at the age of 99.  They all talk about how he touched their lives and changed them for the better.

If you look at the Pyramid above, it becomes clear that it has value as a business management philosophy as well.  He talks about the value of hard work, the wonders of the team, loyalty to yourself and those you lead and doing things with intent.  He talks about striving for greatness and not being satisfied with mediocrity, especially if you can do better.  I always tell my daughter and son that if you cut corners you are only cheating yourself.  You may not always be able to be the best, but you should always strive to be the best you can be.  These philosophies directly relate back to Coach Wooden and they certainly influence every decision I make in my business career.  I encourage you to check out Coach's website (http://www.coachwooden.com) and implement some of his philosophies into your daily life.        

When I was younger, I used to watch the X-Files religiously.  I was from such a small town that on Friday nights I could watch the exploits of Mulder and Scully, hop in my car when the closing credits started to roll and still have time to drive across town to pick up my girlfriend (who somehow ended up marrying ME, which is kind of X-File-ish on its own) for our 8:00 o’clock date.  I remember Fox “Spooky” Mulder running around, telling everyone that the “Truth is Out There.”  One response to Mulder’s seemingly outlandish assertions was “Mulder, extraordinary claims require extraordinary evidence (a.k.a The Sagan Standard).”  Those of you who have read my blogs before probably understand that this got my bizarre mind thinking about how start-up businesses fit into the lending picture.

What do start-ups have to do with the X-Files, spookiness and commercial lending?  Start-up businesses always scare commercial lenders.  I think I have said this before, but commercial lenders are not in the business of providing risk capital.  A certain amount of risk has to be tolerated or no loans would ever be made.  That risk, however, needs to remain as low as possible and still meet the institution’s lending goals.  Making a loan to an existing business with a strong financial performance is a piece of cake.  “Yes please and may I have some more” (for some reason I pictured myself saying this with a British schoolboy accent…oh well).   

Start-ups are, well, “spooky.”  They are inherently risky and everything revolves around assumptions, like those made in the business plan and financial projection (“extraordinary claims require extraordinary proof”).  Lenders will read the business plan and review the projections to make sure it makes sense.  They consider the “5 C’s of Credit (also trying to correlate this to future performance).  The 5 C’s are the borrower’s credit, character, capacity to repay, collateral and the condition of the economy.  If all of this meets the lender’s standards, they will make the loan.  Sometimes these are conventional loans and sometimes they are loans guaranteed by the SBA, for example Express Loans or full 7a Loans.  Most of the time, however, the Real Estate Advantage Loan (504), our specialty, is not an option.  Start-up businesses do not usually require real estate in the beginning.  Renting is usually a more practical and safer way to get the doors open.

For some reason many people think a start-up business cannot qualify for the 504 lending program.  Conspiracy! This is certainly untrue.  Sometimes the 504 is a great option for start-ups.  The Real Estate Advantage Loan (504) follows the same guidelines as listed above, though the “Sagan Standard” might be a little more rigid.    If a start-up finds a great location that fits all of their current and future needs and the entrepreneur is highly qualified to run the business, buying the real estate can be highly desirable.    We will look at every potential deal that comes through the door and put it through our “Fox Mulder” test to see if it passes.  This is not an impossible test to pass (unlike Ms Gerke’s 10th grade geometry tests).  We made a loan to a start-up not long ago.  It was even a restaurant, which made it double spooky. 

Let us know if you have a start-up deal you want us to review.  The truth is out there……..