[soundlab]

Sounds like you've had some negative experiences with your bank. I would beware of "specialized finance firms" that have "sprung up overnight". Typically their lines are very limited and come with huge rates. I don't think there's really much complexity to technology businesses that most competent finance guys can't figure out. They are looking at your P&L and financials for some key ratios, pretty simple. Regardless of whether you're selling lawn mowers or SaaS they want to see strong cashflow. If you're trying to get a loan on MAU growth projections you're probably right.

[beachstartup]

first of all, "pop up overnight" is in "quotes" because they didn't pop up over night. this industry and firms have been in existence for decades but only grew quickly in the last 10 years because commercial banks stopped lending money. did you hear about something called the "credit crisis"?

second, what you're saying is so blindingly obvious that it doesn't even need to be said - startups do not fall into the category of traditional businesses with strong P&Ls and great balance sheets and constantly increasing margins, like a bank wants to see. most bootstrapped startups operate at break even, or can even dip into loss for a few months at a time. these are the companies that need the money.

this will immediately disqualify you for a bank loan. which is the original premise of this entire thread - the banks won't give you shit.

[soundlab]

--startups do not fall into the category of traditional businesses with strong P&Ls and great balance sheets--

So as a bootstrapper are you still taking this approach past year 3 or 4? At a certain point you need to hone in on that repeatable / scalable business model and put up some numbers or fold.

If you're a couple years in and have bootstrapped past breakeven your funding options AND odds of survival are greatly improved- so why not orient around that outcome?

I'm not here to defend the absurd behavior and ignorance of commercial banks just pointing out that sometimes the game changes if you can afford to take a slower more incremental approach to growth than what is typically demanded by VC.

[beachstartup]

yes, you take it past year 3 or 4. you get half a million bucks, a million bucks in the bank during the first years, and then you start spending it on real things. sometimes your cash dips. sometimes you bolster it with a good few months. however, you can't spend it all - you need capital. you need a reasonable amount of debt you can service.

when the bank sees this, they will flip the fuck out. but someone with experience in your industry and a specific financial product designed to help you will know exactly what you're doing.

it's repeatable, it's scalable - however, it requires money to grow just like every other business. this isn't skating by on ultra thin margins with $50k in the bank - it's a business with significant cash that needs significantly more cash, and is willing to sacrifice margins in the short term to grow. and that's not what banks do (these days).

[asah]

+1. That's precisely my first hand experience.