Open City: Recap
Thirty seasoned and aspiring businesses. 3 panelists. 1 moderator. 1 theme: Opening a Business in Detroit without Breaking the Bank.
Here’s the skinny on what the panel discussed, what was asked and what was learned. Mind you, this is a summary, not a verbatim recap. Editorial comments are in brackets.
Bethany, Associate Director of Client Services, gave the familiar Open City Welcome; and welcomed panelists. Matt, the Director, is in the back of the room, attempting to draft this blog. Format: 45 minutes panel, 15 minutes question and answer.
Robin Kinnie: Business Development Manager for CEED. CEED offers micro-loans to Detroit-based businesses. In addition to microloans, CEED offers various conferences and workshops across the state. CEED is here to represent small business micro-loan program; $10,000 – $50,000 loans to entities who may not be bankable in the conventional sense.
David Wible: Comerica Bank, Middle Market. Handles loans and depository relationships. Past includes working at a winery. [Interesting ]
Philip Lauri: Detroit Lives. Detroit Lives is a social brand that represents the manifestation of a vibrant Detroit in many different brands and iterations. We consider it as a multi-media brand in many different lines.
Jack Miner: Entrepreneurial Capital Champion, TechTown. TechTown is Wayne State University’s business incubator. Jack is all about connecting entrepreneurs, like Philip, to resources.
[Alright - let the panel discussion begin - and - onto the q and a]
Jack: What is a perfect “deal” for micro-lending agencies like CEED?
Robin: Let me use an example – husband and wife team opening a restaurant in the city of Detroit. They had experience, but did not have collateral needed to get a bank loan but did have the experience to meet the requirements necessary for receiving a CEED issued micro-loan. Another example is a case where the experience did not exist, but CEED helped with training in finance, bookkeeping, etc. and helped her meet standards required by CEED to provide a microloan.
Takeaway – if you don’t meet the requirements for a CEED issued microloan, CEED can help.
Jack: What are the requirements from a business that a bank looks for?
David: A track record. We need to see results. You need to start with friends and family for financial support in the event that you do not have collateral. Look for programs like CEED who provide micro-loans. Once you have a track record, go to a bank. Beware of credit card finance, as credit matters when seeking a bank loan. Simple things like utility bills matter; banks need to assess risk and we need documentation and proof to support that a loan can be repayed.
Takeaway – build the credit, and document it. Take the proof of good credit and ability to earn revenue and repay to the loan officer for a loan program.
Jack: Philip – what is your take? How difficult is it for you to get financing as an entrepreneur in Detroit?
Philip: I am more of a bootstrapper, using savings and alternative methods to build out Detroit Lives!. More money would enable me to take off bigger chunks; but the issue remains for me to show the financial returns that I would deliver in a method that would satisfy a bank.
Jack: Robin – back to you, what types of lessons have you seen an entrepreneur or start-up learn?
Robin: It is not a piece of cake to be an entrepreneur. A lot has changed since 2008. We had to focus on helping our customers/clients keep the doors open. We focused on loan workouts, and helping each business achieve sustainability in uncertain times. We want to use the microloan as a tool to help other businesses grow, set up shop, and be bankable for the Comerica Banks of the world. This includes helping client businesses be flexible and learn how to evolve their businesses in changing economic times.
Jack: how much of your time, David, is spend on coaching your client businesses at Comerica?
David: So many problems come down to communication [or lack thereof]. It is important for a bank to set expectations, e.g. where there is flexibility and where there is not flexibility. This includes getting connected to the right resources: the right vendors for services such as accounting and legal, etc.
Jack: Philip, how do you listen to the voice of your customer to evolve your business and meet their needs?
Philip: Its about establishing a track record of being a trusted entity who will produce trusted results. I am still a little baby who is continuing to evolve. When I take on things such as film, an expanded clothing line, a vertically integrated manufacturing facility for Detr0it-made products – I need to keep in mind the importance of keeping my ear close to my customer so that I can meet their needs.
Jack: David, how do you ensure your customer keeps her/his business plan relevant?
David: It depends on the size of the loan offered. Larger loans include more specialists. Nonetheless, when I am working with a company, I go deep – beyond the CEO and CFO. The best relationships are where I am talking with many on the client’s team. Where we have an open, trusting relationship where we share information, so that we can mitigate risk and so that the client has proper expectations on which to base his/her growth.
Jack: Robin, how does this look at CEED?
Robin: At the end of the process, at least 10 people at CEED has reviewed and provided feedback as to a client’s business. Moreover, we have been able to connect specialists and partner organizations throughout the city to these clients and businesses seeking services. Legal, business mentorship, etc – we can help through our partners.
Jack: What are most important things to look for in a business plan?
Robin: Executive summary, first. Is it exciting, new, beneficial to the city of Detroit. Second – who is on the team? Does the team have the experience to execute the business plan. Third – finances are important. We want to see if you are in the position to re-pay the microloan. Unexpected business visits are also important, as they enable us to see what honest, day-to-day operations look like.
Jack: Philip – how do you articulate your vision to potential funders, strategic partners, etc?
Philip: Numbers speak for themselves. It’s all about numbers.
Jack: David, how could Philip make himself bankable?
David: Philip has all of the competencies. Now it is about the numbers. Proving that he has a good business case for such an investment.
Robin: The marketing strategy is key. Who is your customer, your client? What is your unique selling proposition? How do you engage your audiences, and carry a conversation with them? That is important. We have a staff member at CEED – our PRIME Program Manager – who will help with your marketing strategy, if it makes sense.
Jack: What is the most effective funding mechanism that you or your clients use today. From TechTown’s perspective, it is the Hebrew Free Loan Fund is great, as 75% of those who are referred get funded.
Robin: Our clients use many different vehicles. When people think outside the box, it helps. Bootstrapping. Friends and family. Other microloans and programs.
David: Collateral is good. It helps. Physical. Intellectual – patents, licensing agreements etc. Something that can secure the loan always helps.
Philip: David makes good, conventional points. But let’s talk about crowd-sourcing, e.g griding off murals. Make someone pay $5 for a part of a mural.
Jack: We’ll turn it over to questions, and if anyone has a question, we’ll listen.
Question 1: Where can I find more info about the Hebrew Free Loan?
Jack: Check out www.techtownwsu.org and find my contact information. I can help. The business needs to be more than 51% owned by a Jewish person.
Question 2: What would each of you say is the industry with greatest potential around Detroit right now?
Philip: We have strong resources for manufactoring, including the highest concentration of engineers in the country.
Robin: I guess I would say the hardest business to break into just about anywhere right now is the restaurant industry- there’s just so many upfront costs and you can never quite tell how it will perform.
David: I think there is a great opportunity for outsourcing right now. Because the cost of doing business in Detroit is so much more affordable than many other cities, companies here can actually afford higher numbers of staff and resources/equipment. For example, an advertising company in San Francisco can actually expand their design/creative team in Detroit, and work together virtually.
Question 3: How important is the name of a company in attracting investment?
Philip: Well, my name says it all [love it or leave it].
David: Names are important, they need to be clear, compelling and tell what you do.
Jack: This concludes our discussion. Thanks for the time and perspectives.
[rousing applause ]
Bethany: we’ll open it up for 1-1 discussions with the panelists and experts. Thanks again!
[And thank you for reading this blog and learning a bit more about the various business funding programs in Detroit, for more info, check out our resources tab on www.detroitcreativecorridorcenter.com]