One giant step toward a loan

Nation's Business, August, 1997 by Susan Hodges

David Cupp dared to be different. Instead of using personal savings to start his firm--Photos Online, Inc. in the Columbus, Ohio, suburb of Hilliard--Cupp did what many new business owners never even try: He went to a bank and applied for a loan.

It took him five tries at five banks over nearly seven months, plus countless hours of refining his business plan, but in the end he came away a winner. In March 1995, Bank One, Columbus, approved a $26,000 term loan for Cupp and also granted him a $24,000 line of credit.

Bank One's decision was unusual because the bank didn't require a loan guarantee from the U.S. Small Business Administration. The SBA guarantees bank loans (though not lines of credit) for small firms that meet strict financial and documentation criteria. Knowing this, bankers almost always require an SBA guarantee before they will even consider lending money to a start-up.

But Cupp, whose revenues totaled $50,000 last year--his first full year in business--and are projected to top $100,000 this year, took a less traveled road to start-up financing, and it paid off. How did he do it? "With lots of free help from the SBA and a banker who believed in my idea," he says. "Without a good business plan, it wouldn't have happened."

Business plans are documents that tell potential lenders and investors why money is needed, how it will be used to start or improve a company, and how the money will be paid back. But many new owners don't have a business plan and are not sure how to create one.

Cupp was such an owner.

In the fall of 1994, Cupp decided to start his own company A professional photographer who has done assignments for National Geographic and has a degree in journalism, he owns hundreds of thou sands of photographs from dozens of freelance assignments around the world. Among his credits is a Pulitzer Prize nomination for a photo chosen for placement aboard a Voyager spacecraft that made an interplanetary flight in the late 1970s.

Cupp also has a broad knowledge of the Internet.

"I saw an opportunity to put together an electronic photography stock house in a way that hadn't been done before," he says. But he needed $25,000 for computers and software plus funds for living expenses while he got his, business off the ground.

First, Cupp recruited his brother Robert as a partner. A prominent golf-course designer with a successful company in Atlanta, Robert invested $10,000 and agreed to use his business expertise to help launch Photos Online.

Next, Cupp went to the SBA's Columbus office for help. He was asked if he had a business plan.

"I said, `A what?'" recalls Cupp. "I didn't even know what a business plan was."

After attending an SBA seminar on business-plan writing, Cupp met with Harry Long of the SBA's Service Corps of Retired Executives. SCORE members volunteer their time and expertise to individuals who are seeking SBA help with business plans budgeting, and other matters vital to a company's success. Long is a retired CEO of a Columbus-based wholesale lumber company.

"I told him to write a clear and succinct statement of purpose as well as an opening balance sheet and at least two years of profit and loss projections," says Long.

Cupp balked. "I was lousy at math, and this was unlike anything I'd ever done," he recalls. "I don't know how many times Harry made me rewrite my business plan, but it was a lot."

In addition, Cupp began working with tax accountant Wayne Logan, an SBA volunteer. Logan helped assemble the information that Cupp would need by asking questions. What was Cupp's idea, in one sentence? Bankers would read no further than the opening statement if they couldn't understand the business quickly Logan told him.

"Then I asked, `If you sold something, how much money are we talking about?'" says Logan. How many photographs could Cupp supply, and how often? How long would it take to sell the first one, and the second?

"The goal is to translate your ideas into dollars," says Logan. "Once your figures are complete, it's a matter of organizing them into a recognizable financial statement."

Four times Cupp thought his plan was complete, and four times he visited different loan officers. Each one rejected his idea.

"They weren't willing to look at my education or experience," says Cupp. "They said my idea was outside their realm of experience."

With each rejection, Cupp returned to the drawing board. Each time he added material, until his plan became a 35-page document containing information such as an analysis of his competition and cash-flow projections.

The fifth banker Cupp approached was more open-minded. "David's idea was certainly new, but his background and work for highly reputable companies meant a lot," says James R. Grant, assistant vice president of Bank One. Grant was impressed with Cupp's photographs and thought that his idea was excellent.

"We believe in start-up businesses here, and we like to be involved from the beginning," says Grant. "We thought David Cupp had the background to make it happen."